Baker & Co. has applied for a loan from the Trust Us Bank in order to invest in several potential opportunities. In order to evaluate the firm as a potential debtor, the bank would like to compare Baker & Co. to the industry. The following are the financial statements given to Trust Us Bank: Assume all profits are retained for both periods as no dividend was paid out.

Balance Sheet 12/31/95 12/31/96

Cash $305 $270

Accounts receivable 275 290

Inventory 600 580

Current assets 1,180 1,140

Plant and equipment 1,700 1,940

Less: acc depr (500) (600)

Net plant and equipment 1,200 1,340

Total assets $2,380 $2,480

Liabilities and Owners' Equity

Accounts payable $150 $200

Notes payable 125 0__

Current liabilities 275 200

Bonds 500 500

Total owners' equity 1,605 1,780

Total liabilities and owners equity ' $2,380 $2,480

Income Statement

Sales (100% credit) $1,100 $1,330

Cost of goods sold 600 760

Gross profit 500 570

Operating expenses 20 30

Depreciation 160 200

Net operating income 320 340

Interest expense 64 57

Net income before taxes 256 283

Taxes 87 96

Net income $169 $187

1. What is the Altman Z-Score for both years? (12 marks)
2. What is the score revealing with respect to the company? ( 7 marks)

(c) What does structuring of a credit facility mean? (6 marks)