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

question 24

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 = 0.15,X₂ = Retained earnings/Total assets = 0.10,X₃ = Earnings before interest and taxes/Total assets = 0.15,X₄ = Market value of equity/Book value of long-term debt = 0.40,X₅ = Sales/Total assets ratio = 0.8.Calculate the Altman's Z-score for this firm.

• A)9.10
• B)1.60
• C)0.371
• D)1.855

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Definitions:

Expectancies

Beliefs or predictions about the outcomes of certain behaviors or events.

Opportunities

Circumstances that present chances for advancement, progress, or benefit in various contexts such as career, personal growth, or investment.

Convergent Validation

The process of assembling diverse pieces of information that converge on a common conclusion.

Interjudge Agreement

The degree of consistency or accord in the assessments or ratings of different judges or observers.