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

question 113

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 = 0.25,X₂ = Retained earnings/Total assets = 0.30,X₃ = Earnings before interest and taxes/Total assets = 0.35,X₄ = Market value of equity/Book value of long-term debt = 0.50,X₅ = Sales/Total assets ratio = 0.9.Calculate the Altman's Z-score for this firm.

• A)2.30
• B)3.075
• C)9.8
• D)1.96

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Definitions:

Corporate Culture

The shared values, beliefs, and practices that characterize an organization and influence its employees' behavior and attitudes.

Job Control Unionism

A labor movement strategy focusing on gaining control over work conditions, job distribution, and employment terms through collective bargaining.

Scientific Management

A management theory focusing on improving work efficiency through systematic observation, measurement, and restructuring of workflow processes.

Managerial Decisions

Choices made by managers or executives within organizations that influence direction, operations, and outcomes, based on analysis and judgement.