Using a Modified Discriminant Function Similar to Altman's,Burger Bank Estimates

question 16

Multiple Choice

Using a modified discriminant function similar to Altman's,Burger Bank estimates the following coefficients for its portfolio of loans:

Z = 1.4X₁ + 1.09X₂ + 1.5X₃
where X₁ = debt to asset ratio;X₂ = net income and X₃ = dividend payout ratio.

Using Z = 1.682 as the cut-off rate,what should be the debt to asset ratio of the firm in order for the bank to approve the loan?

• A)40.0 percent.
• B)46.5 percent.
• C)51.5 percent.
• D)54.0 percent.

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Definitions:

Corporate Partners

Businesses that collaborate or form alliances for mutual benefit or to achieve specific objectives.

Focal Company

The primary business within a larger supply chain or network, which drives the strategic decisions and partnerships.

Consumer's Immediate Environment

The consumer's immediate environment encompasses the physical and social surroundings that influence the consumer's behavior, decisions, and experiences during the purchasing process.

Competition

The rivalry among businesses to attract customers and achieve market superiority by offering better goods, services, or prices.