Which of the Following Financial Ratios Has the Highest Weight

question 52

Multiple Choice

Which of the following financial ratios has the highest weight in Altman's Z-score estimation?

• A) Working capital/total assets
• B) Retained earnings/total assets
• C) EBIT/total assets
• D) Sales/total assets

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Definitions:

Machine Hours

A measure of the amount of time a machine is operated, used as a basis for allocating manufacturing overhead to products.

Theory of Constraints

A management paradigm that focuses on identifying and addressing the most significant limiting factor (constraint) that hinders achieving a goal, and systematically improving that constraint until it is no longer the limiting factor.

Contribution Margin

Contribution margin is the amount by which a product's sales price exceeds its total variable costs, indicating how much contributes to covering fixed costs and generating profit.

Bottleneck Process

A bottleneck process is a stage in production that reduces the efficiency of the operation due to limited capacity, slowing down the overall process flow and impacting productivity.