E19.4. Z-Scoring (Easy) Below are ratios for some of the firms that have appeared in this book, for their 1998 fiscal year. Working Retained Capital Earnings Earnings before Interest and Taxes Market Value of Equity Sales Total Total Total Book Value Total Firm Assets Assets Assets of Liabilities Assets Coca-Cola -0.12 1.05 0.29 15.4 0.98 Nike 0.34 0.58 0.15 9.0 1.67 Reebok 0.43 0.66 0.06 0.7 1.85 Hewlett-Packard 0.24 0.50 0.13 3.6 1.40 Dell, Inc. 0.38 0.09 0.31 27.9 2.65 Gateway Computer 0.27 0.34 0.19 5.2 2.59 Microsoft 0.45 0.34 0.32 46.7 0.65

a. Calculate Z-scores from these ratios.

b. Explain why Nike has a different Z-score from Reebok.

c. What reservations do you have about the Z-score as an indicator of creditworthiness?