Calculate the Altman Z-score of a firm who has the following financials: • Working capital = $1,000 • Retained earnings = $10,000 Earnings before interest and tax = $3,000 Market value of equity = $30,000 Total liabilities = $30,000 • • Sales $5,000 • Total Assets = $60,000 Altman Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E Where: • A = working capital / total assets • B = retained earnings / total assets • C = earnings before interest and tax / total assets • D market value of equity / total liabilities • E = sales / total assets

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
icon
Concept explainers
Question
Calculate the Altman Z-score of a firm who has the following financials:
• Working capital = $1,000
• Retained earnings = $10,000
• Earnings before interest and tax = $3,000
●
Market value of equity = $30,000
• Total liabilities = $30,000
• Sales $5,000
• Total Assets = $60,000
Altman Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
• A = working capital / total assets
B = retained earnings / total assets
●
C = earnings before interest and tax / total assets
D = market value of equity / total liabilities
E sales / total assets
Transcribed Image Text:Calculate the Altman Z-score of a firm who has the following financials: • Working capital = $1,000 • Retained earnings = $10,000 • Earnings before interest and tax = $3,000 ● Market value of equity = $30,000 • Total liabilities = $30,000 • Sales $5,000 • Total Assets = $60,000 Altman Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E Where: • A = working capital / total assets B = retained earnings / total assets ● C = earnings before interest and tax / total assets D = market value of equity / total liabilities E sales / total assets
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Cost of Capital
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education