HOW IS THIS - Slide 3: Altman's Z-Score Model Formula: ( Z = 1.2X_1 + 1.4X_2 + 3.3X_3 + 0.6X_4 + 1.0X_5 ) Components: Working Capital, Retained Earnings, EBIT, Market Value of Equity, Sales. Speaker's Note: Altman's Z-Score is a financial model used to predict the likelihood of a company going bankrupt. It combines five key financial ratios into a single score, providing a comprehensive view of a company's financial health. The formula is ( Z = 1.2X_1 + 1.4X_2 + 3.3X_3 + 0.6X_4 + 1.0X_5 ). Each component of the formula represents a different aspect of the company's financial status. (X_1) (Working Capital/Total Assets): This ratio measures liquidity by comparing working capital to total assets, indicating how well the company can cover its short-term obligations. (X_2) (Retained Earnings/Total Assets): This ratio assesses profitability and the company's ability to reinvest earnings, reflecting its long-term financial stability. (X_3) (EBIT/Total Assets): Earnings Before Interest and Taxes (EBIT) relative to total assets shows operational efficiency and profitability. (X_4) (Market Value of Equity/Book Value of Total Liabilities): This ratio evaluates the company's leverage and market perception, indicating how much equity is available to cover liabilities. (X_5) (Sales/Total Assets): This measures asset turnover, showing how effectively the company uses its assets to generate sales. By analyzing these components, Altman's Z-Score provides a quantitative measure of bankrup