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

question 61

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 = .15, X₂ = Retained earnings/Total assets = .10, X₃ = Earnings before interest and taxes/Total assets = .15, X₄ = Market value of equity/Book value of long-term debt = .40, X₅ = Sales/Total assets ratio = 0.8. Calculate the Altman's Z-score for this firm.

• A) 9.10
• B) 1.60
• C) 0.371
• D) 1.855

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