By using a graphic organizer of your choice, create a visual graphic that visually explains your response to the following: A friend has mentioned that she has read that the following variables can be used to predict bankruptcy: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relative to sales or assets; (d) the return on assets; (e) the market-to-book ratio; (f) the recent return on the stock; and (g) the volatility of the stock returns. The problem is, she can't remember whether a high value of each variable implies a high or a low probability of bankruptcy. Help your friend remember the information she needs to know by creating a visual graphic

By using a graphic organizer of your choice, create a visual graphic that visually explains your response to the following: A friend has mentioned that she has read that the following variables can be used to predict bankruptcy: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relative to sales or assets; (d) the return on assets; (e) the market-to-book ratio; (f) the recent return on the stock; and (g) the volatility of the stock returns. The problem is, she can't remember whether a high value of each variable implies a high or a low probability of bankruptcy. Help your friend remember the information she needs to know by creating a visual graphic

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter5: Risk Analysis

Section: Chapter Questions

Problem 12QE: Altmans bankruptcy risk model utilizes the values of the variables at a particular point in time...

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Altmans bankruptcy risk model utilizes the values of the variables at a particular point in time (balance sheet variables) or for a period of time (income statement values). An alternative would be to use changes in balance sheet or income statement amounts. Why might the levels of values in Altmans model be more appropriate than changes for predicting bankruptcy?
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