Ali plc and Bhaskar plc both operate electrical stores throughout the UK. The financial statements of each business for the year ended 30 June 2018 are as follows:

Ali plc paid a dividend of £135 million and Bhaskar plc £95 million during the year. The market values of a share in Ali plc and Bhaskar plc at the end of the year were £6.50 and £8.20 respectively.

Required:

(a) Calculate the Z-scores for Ali plc and Bhaskar plc using the Altman model given in the text.

(b) Comment on the Z-scores calculated and on the validity of using this particular model to assess these businesses.

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Statements of financial position as at 30 June 2018 Ali plc £m ASSETS Non-current assets Property, plant and equipment (cost less depreciation) Land and buildings Fixtures and fittings Current assets Inventories Trade receivables Cash at bank Total assets EQUITY AND LIABILITIES Equity 360.0 87.0 447.0 592.0 176.4 84.6 853.0 1,300.0 Bhaskar plc £m 510.0 91.2 601.2 403.0 321.9 91.6 816.5 1,417.7