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Following the Z score proposed by Edward Altman, calculate the Z score of a firm with the following financial ratios:
Market value of equity/Total book debt = 0.9
EBIT/Total assets = 0.12
Sales/Total assets = 1.4
Retained earnings/Total assets = 0.4
Working capital/Total assets = 0.12
Book Depreciation Expense
The systematic allocation of the cost of a tangible asset over its useful life for accounting purposes, as reflected in the financial statements.
Warranty Expense
Costs incurred by a company for repairing, replacing, or refunding products under warranty, considered a contingent liability until incurred.
Unrealized Loss
A loss that results from holding onto an asset that has decreased in price, but has not yet been sold.
Tax Rate
The rate at which the government imposes taxes on the income or earnings of a person or a company.
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