Edward IAltman Developed a Multivariate Model to Predict Bankruptcy

question 23

Multiple Choice

Edward I.Altman developed a multivariate model to predict bankruptcy.The model produces an overall discriminant score called a Z value.Which of the following statements is probably an unreasonable statement relating to the Z value?

• A)The sales generating ability of the firm's assets is one of the important considerations in the Z value.
• B)The lack of a market value for a company's stock will reduce the significance of the Z value approach.
• C)Total assets is an important consideration in the Z value computation.
• D)Cumulative profitability over time is considered in the Z value computation.
• E)A Z score of 2.00 or below indicates a very healthy company.

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Definitions:

Similarity

The state of being alike or sharing common features.

Proximity

The physical or psychological closeness between people, which is a major factor influencing interpersonal attraction and the formation of social relationships.

Self-Disclosure

The act of revealing personal, private information about oneself to others.

Companionate Love

The deep affectionate attachment we feel for those with whom our lives are intertwined.