The Role of Financial Statement Analysis While Predicting Business Failure with Reference to RCom

This study explores the function of financial statement analysis as an early warning tool for predicting corporate financial distress using Reliance Communications (RCom) as a case study. RCom, a giant in India's telecommunications market, suffered a tremendous financial decline that ended in insolvency proceedings by 2019. This study assesses whether warning signs of business failure existed early using common financial ratios and bankruptcy forecasting models. We employed a quantitative approach to examine the secondary data of RCom's audited financial reports from 2014 to 2019. The financial ratios of key areas, such as profitability, liquidity, solvency, and efficiency, were examined to outline the course of the company's finances. The Altman Z-score and Ohlson O-score were also used to determine the probability of failure. The results show a steady downward trend in finance from 2015, with both models correctly forecasting distress long before bankruptcy. The research concludes that careful financial analysis, backed by forecasting models, can serve as a sound early warning system for stakeholders, particularly in capital-intensive industries, such as telecommunications.