Question: Suppose that the financial ratios of a potential borrowing firm
Suppose that the financial ratios of a potential borrowing firm took the following values: X1 = Net working capital/Total assets = 0.10, X2 = Retained earnings/Total assets = 0.20, X3 = Earnings before interest and taxes/ Total assets = 0.22, X4 = Market value of equity/Book value of long-term debt = 0.60, X5 = Sales/ Total assets ratio = 0.9. Calculate and interpret the Altman’s Z-score for this firm.
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