Suppose a Firm Has a Z Score of 1

question 75

Multiple Choice

Suppose a firm has a Z score of 1.6,and the following financial characteristics: working capital to total assets ratio of 0.05,retained earnings to total assets ratio of 0.10,market value of equity to book value of equity ratio of 1.1,and sales to total assets ratio of 0.4.What must be its EBIT to total assets ratio?

• A) 0.15
• B) 0.10
• C) 0.05
• D) 0.0

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Definitions:

Raw Materials

The basic substances or components that are used in the manufacturing process to produce finished goods.

T-Accounts

A visual representation used in accounting to depict the debits and credits of an account, showing two sides of transactions within a ledger.

Transactions

Financial activities or exchanges between parties that involve the transfer of goods, services, or funds.

Overapplied Overhead

When the overhead costs allocated for manufacturing are higher than the actual overhead expenditures.