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

question 72

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 = .25, X₂ = Retained earnings/Total assets = .30, X₃ = Earnings before interest and taxes/Total assets = .35, X₄ = Market value of equity/Book value of long-term debt = .50, X₅ = Sales/Total assets ratio = 0.9. Calculate the Altman's Z-score for this firm.

• A) 2.30
• B) 3.075
• C) 9.8
• D) 1.96

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Definitions:

Type of Item

Refers to the categorization or classification of an item based on its attributes, purpose, or other distinguishing characteristics.

Blocking

A technique used in experimental design to minimize the effects of variable confounding by grouping similar experimental units together and randomly assigning treatments within these blocks.

Incentive

A positive or negative environmental stimulus that motivates behavior.

Exam Scores

Numerical values that represent the performance of individuals on academic assessments.