Calculation of Altman's Z-Score: Suppose That the Financial Ratios of a Potential

question 55

Multiple Choice

Calculation of Altman's Z-Score: Suppose that the financial ratios of a potential borrowing firm took the following values: X₁ = Net working capital/Total assets = .30, X₂ = Retained earnings/Total assets = .40, X₃ = Earnings before interest and taxes/Total assets = .43, X₄ = Market value of equity/Book value of long-term debt = .65, X₅ = Sales/Total assets ratio = 0.95. Calculate the Altman's Z-score for this firm.

• A) 3.679
• B) 2.73
• C) 10.23
• D) 2.046

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Definitions:

Trachea

In insects, air tube located between the spiracles and the tracheoles. In tetrapod vertebrates, air tube (windpipe) that runs between the larynx and the bronchi.

Cephalothorax

A body region found in certain arthropods, including spiders and crustaceans, that combines the head and the thorax into one unit.

Fangs

Long, pointed teeth typically found in venomous snakes used to inject venom, or in some mammals for grasping and tearing.

Deuterostome

Group of coelomate animals in which the second embryonic opening is associated with the mouth; the first embryonic opening, the blastopore, is associated with the anus.