In the Z Score Model for Private fiRms, the Z

question 16

Essay

In the Z score model for private firms, the Z score is calculated as Z = 0.717 (Net Working Capital/Total Assets) + 0.847 (Accumulated Retained Earnings/Total Assets) +3.10 (EBIT/Total Assets) + 0.420 (Book Value of Equity/Total Liabilities) +0.998 (Sales/Total Assets).You are part owner of a private firm, which will start to make losses.To help pay the bills, the firm considers taking out an additional loan.What do you expect to happen to the firm's Z score?

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Definitions:

Gluc/o

A word root used in the medical field to refer to sugar, particularly glucose, which is a primary source of energy for the body's cells.

Parathyroid Glands

Small endocrine glands located in the neck behind the thyroid, which regulate calcium levels in the blood and bone metabolism.

Thyroid Gland

An endocrine gland in the neck that produces hormones regulating the body's metabolic rate, heart and digestive function, muscle control, brain development, and bone maintenance.

Poison

A substance that is capable of causing illness or death when introduced into the body.