(a) Calculate the Z-scores for Ali plc and Bhaskar plc (see SAQ 7.1 on pages 250 251),...


(a) Calculate the Z-scores for Ali plc and Bhaskar plc (see SAQ 7.1 on pages 250 €“251), using the Altman model set out on page 280.

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

Data from SAQ 7.1:

Both Ali plc and Bhaskar plc operate wholesale electrical stores throughout the UK. The financial statements of each business for the year ended 30 June 2010 are as follows:

Statements of financial position as at 30 June 2010 Ali plc Bhaskar plc ASSETS £m £m Non-current assets Property, plan

All purchases and sales were on credit. Ali plc had announced its intention to pay a dividend of £135 million and Bhaskar plc £95 million in respect of 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.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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