Calculation of Altman's Z-Score: Suppose That the Financial Ratios of a Potential

question 25

Multiple Choice

Calculation of Altman's Z-Score: Suppose that the financial ratios of a potential borrowing firm took the following values: X₁ = Net working capital/Total assets = 0.35,X₂ = Retained earnings/Total assets = 0.50,X₃ = Earnings before interest and taxes/Total assets = 0.60,X₄ = Market value of equity/Book value of long-term debt = 1.50,X₅ = Sales/Total assets ratio = 3.65.Calculate the Altman's Z-score for this firm.

• A)7.65
• B)1.54
• C)6.60
• D)1.32

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