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Ideal Leverage via Machine Learning: Avoiding Financial Distress

Table 6: Prominent rules generated by RF to predict profit/ loss.

RULE NO AGE (AS YEAR) LEVERAGE RATIO ACID-TEST RATIO CASH RATIO MARKETING EXPENSES/SALES% PROFIT % LOSS %
1 > 18 < 0.38 > 0.67 81
2 > 44 < 0.63 < 0.65 85
3 > 47 < 0.78 <7 88
4 > 52 0.67-0.73 > 16 92.5
5 > 50 8-16 95
6 > 53 < 0.83 90
7 > 58 0.73-0.81 > 0.07 100
8 52-63 < 0.88 90
9 > 65 > 0.63 < 0.65 95
10 N.A. 0.83-0.88 > 0.52 94
11 N.A. 0.83-0.88 > 0.24 92
12 > 57 0.65-0.68 0.08-0.11 100
13 > 23 < 0.64 > 0.14 89
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