Exhibit 5.21 presents selected financial data for Best Buy Co., Inc., and Circuit City Stores, Inc., for fiscal 2008 and 2007. Best Buy and Circuit City operate as specialty retailers offering a wide range of consumer electronics, service contracts, product repairs, and home installation. Competition from Walmart, Costco, and Internet retailers put downward pressure on prices and margins. In November 2008, Circuit City filed Chapter 7 bankruptcy. In the media, Circuit City's bankruptcy was largely blamed on its poor treatment of employees. In early 2007, Circuit City laid off 3,400 high-paid salespersons, or approximately 8% of its workforce, which left inexperienced, low-paid workers in charge of customer service. Customer service quality plummeted, which was especially harmful for a retail business providing expensive electronic items, warranty products, and installation services.

REQUIRED
a. Compute Altman€™s Z-score for Best Buy and Circuit City for 2007 and 2008.
b. How did the bankruptcy risk of Best Buy change between 2007 and 2008? Explain.
c. How did the bankruptcy risk of Circuit City change between 2007 and 2008? Explain.

d. As noted, Circuit City filed Chapter 7 bankruptcy in November 2008. Using the analysis from Requirements b and c, would you have predicted Circuit City or Best Buy to file bankruptcy in 2008? Explain.

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Exhibit 5.21 Select Financial Data for Best Buy and Circuit City (amounts in thousands, except per-share amounts) (Problem 5.19) Best Buy Circuit City Year Ended March 1, Year Ended Feb. 28, 2008 2007 2008 2007 Sales $40,023 $35,934 $11,744 $12,430 Net income (loss) before interest and taxes $2,290 $1,407 $7,342 $2,161 $(352) $22 Net income (loss) $1,377 $(321) $(10) Current assets $9,081 $2,440 $2,884 Total assets $12,758 $13,570 $3,746 $4,007 Current liabilities $6,769 $6,301 $1,606 $1,714 Total liabilities $8,274 $3,933 $7,369 $5,507 $243 $2,216 $1,336 Retained earnings Common shares outstanding Market price per share $981 411 481 169 171 $18.47 $42.00 $44.97 $4.38