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

question 26

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 = .35, X₂ = Retained earnings/Total assets = .50, X₃ = Earnings before interest and taxes/Total assets = .60, X₄ = Market value of equity/Book value of long-term debt = 1.50, X₅ = Sales/Total assets ratio = 3.65. Calculate the Altman's Z-score for this firm.

• A) 7.65
• B) 1.54
• C) 6.60
• D) 1.32

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Definitions:

Sensory Adaptation

The process by which sensory receptors become less sensitive to constant stimuli over time.

Microsaccades

Small, involuntary eye movements that occur when the gaze is fixed, helping in refreshing the image on the retina to prevent visual fading.

Optic Chiasm

The optic chiasm is a crucial part of the brain where the optic nerves partially cross, allowing visual information from both eyes to be processed by both hemispheres of the brain.

Discrimination

The practice of injustice towards individuals by discriminating against them based on race, age, or sex.