Compute and Interpret Altman's Z-scores Following is selected financial information for eBay Inc., for its fiscal years
Question:
Compute and Interpret Altman's Z-scores
Following is selected financial information for eBay Inc., for its fiscal years 2013 and 2012.
(In millions, except per share data) | 2013 | 2012 |
---|---|---|
Current assets | $ 23,283 | $ 21,398 |
Current liabilities | 12,639 | 10,924 |
Total assets | 41,488 | 37,074 |
Total liabilities | 17,841 | 16,209 |
Shares outstanding | 1,294 | 1,286 |
Retained earnings | 18,854 | 15,998 |
Stock price per share | 54.87 | 51.00 |
Sales | 16,047 | 14,072 |
Earnings before interest and taxes | 3,371 | 2,888 |
Compute and interpret Altman Z-scores for the company for both years. (Do not round until your final answer; then round your answers to two decimal places.)
2013 z-score = Answer
2012 z-score = Answer
Which of the following best describes the company's likelihood to go bankrupt given the z-score in 2013 compared to 2014?
The z-scores for both 2013 and 2012 are relatively the same. The company is sufficiently healthy for bankruptcy to remain a distant concern.
The z-score in 2013 is double the 2012 score. The z-score has increased sharply, which suggests the company has greatly increased the risk of bankruptcy.
The z-score in 2013 is half of the 2012 score. The z-score has decreased sharply, which suggests the company is in financial distress.
The z-score in 2013 is double the 2012 score. The z-score has increased sharply, which suggests the company has greatly lowered the risk of bankruptcy.
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds