Which of the Following Is True of Altman's Z-Score Boundaries

question 28

Multiple Choice

Which of the following is true of Altman's Z-Score Boundaries?

• A) If a publicly traded non-manufacturing firm has a Z-score of 1.81, it predicts bankruptcy.
• B) If a publicly traded manufacturing firm has a Z-score of 2.60, it indicates non-bankruptcy.
• C) If a publicly traded manufacturing firm has a Z-score of 1.42, the firm is in the zone of ignorance.
• D) The zone of ignorance for privately held manufacturing firms is 1.23 to 2.90.

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Definitions:

Net Operating Income

The profit realized from a business's operations after subtracting operating expenses but before taxes and interest.

Variable Selling

Refers to the costs associated with selling a product or service that fluctuate with the level of sales activity, such as commissions and shipping charges.

Absorption Costing

A cost accounting methodology that absorbs all production costs, like direct materials, direct labor, and overhead expenses whether variable or fixed, into the final cost of a product.

Variable Costing

A costing method that includes only the variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.