Suppose that the financial ratios of a potential borrowing firm take the following values: Working capital/total assets

Question:

Suppose that the of a potential borrowing firm take the following values:
Working capital/total assets ratio (X1) = 0.75
Retained earnings/total assets ratio (X2) = 0.10
Earnings before interest and taxes/total assets ratio (X3) = 0.05
Market value of equity/book value of long-term debt ratio (X4) = 0.10
Sales/total assets ratio (X5) = 0.65
Calculate the Altman’s Z-score for the borrower in question. How is this number a sign of
the borrower’s default risk?
Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...