The Altman's Z score for a firm is estimated as follows: Where: Z = 1.2 X 1
Question:
The Altman's Z score for a firm is estimated as follows:
Where:
Z = 1.2 X1+ 1.4 X2+ 3.3 X3+ 0.6X4+ 1.0 X5
A firm's Financial Statement information in millions of dollars is given below:
X1= Working Capital / Total Assets
X2= Retained Earnings / Total Assets
X3= EBIT / Total Assets
X4= Market Value of Equity/ Book Value of Total Liabilities
X5= Sales /Total assets
A firm's Financial Statement information in millions of dollars is given below:
Assets
Cash20
Accounts receivables70
Inventory150
Plant and Equipment860
Total Assets1,100
Liabilities and Equity
Accounts Payable20
Notes Payable40
Accruals30
Long-term debt600
Equity (retained Earnings = 150)410
Total Liabilities & Equity1,100
Other Information
Sales = $900EBIT = $200
The Market Value of Equity is equal to 1.5 times the book value.
Estimate the Z-Score for the firm. Please show working for X1to X5on your answer script.
Calculate values up to 3 decimal places
Expert Answer:
