Many analysts argue that football clubs are special cases and you cannot blindly apply standard Z-score models to the industry. Critically assess this argument and discuss why you think it may or may not be valid. Which variables do you perceive to be most important for football clubs? Which ones do you think are less relevant? Explain your answer. Refer to Real World Insight 29.2.

Real World Insight 29.2

In 2012, European football was rocked when Rangers Football Club entered administration. Although the club had the 14th largest match-day revenues in Europe, a lack of commercial and television opportunities led to its demise. What about other Scottish football clubs? Were they living beyond their means as well? In the table below, we present the Z-scores for each club using the most recent set of accounts. Almost all Scottish clubs are private firms and so the modified Zscore model will be used.

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Team Aberdeen Celtic Dundee Utd Dunfermline Hearts Hibernian Inverness CT Kilmarnock Motherwell Rangers St Johnstone St Mirren T1 -0.442 -0.110 -1.191 -0.410 0.955 -0.121 -0.218 -0.233 0.003 -0.158 0.545 -0.030 T2 -0.608 -0.269 -0.949 -7.819 -2.381 0.195 -3.337 -0.527 0.322 -0.996 0.688 0.827 T3 -0.063 0.010 -0.041 -0.173 0.085 0.009 -0.188 0.021 0.169 0.041 0.000 -0.030 T4 0.037 0.917 -0.350 -0.796 -0.551 1.204 -0.153 0.220 0.866 1.080 3.606 13.846 T5 0.337 0.628 0.773 1.093 0.405 0.257 3.523 0.450 1.776 0.413 0.000 0.275 Z-score -0.675 0.736 -1.161 -6.697 -0.896 0.808 -0.115 -0.008 2.938 0.036 2.488 6.676