The Here Today Corporation Has Applied to Your Bank for a Loan

question 23

Essay

The Here Today Corporation has applied to your bank for a loan. You have their financial statements and the revised Z-score model of:
Z = 6.56 (Net Working Capital/Total Assets) + 3.26 (Accumulated Retained Earnings/Total Assets) + 1.05 (EBIT/Total Assets) + 6.72 (Book Value of Equity/Total Liabilities) where:
Z < 1.23 predicts bankruptcy. A Z score between 1.23 and 2.90 indicates gray area. A Z score greater than 2.90 indicates no bankruptcy. From the financial statements you gathered net working capital of $237,500; accumulated retained earnings of $120,000; book value of equity of $950,000; total assets of $4,750,000; EBIT of $261,250; and total liabilities of $3,800,000. Should the bank lend to Here Today?

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Definitions:

Depressive Disorders

A group of conditions characterized by persistent feelings of sadness, emptiness, and despondency, significantly impacting daily functioning and quality of life.

Rapidly

Occurring in a short period of time or happening quickly.

Motor Disturbances

Disruptions or impairments in the capacity to perform voluntary muscle movements, often indicative of neurological disorders.

Schizophrenia

A mental disorder characterized by disruptions in thought processes, perceptions, emotional responsiveness, and social interactions.