Compute and Interpret Altman's Z-scores Following is selected financial information for ebay, for its fiscal years 2005 and 2006. (In millions, except per share data) Current assets Current liabilities Total assets Total liabilities Shares outstanding Retained earnings 2006 2005 $4,971.59 $3,184.24 2,515.39 1,481.93 13,498.01 11,792.99 2,591.38 1,743.00 1,368.51 1,404.18 4,541.35 2,822.64
Compute and Interpret Altman's Z-scores Following is selected financial information for ebay, for its fiscal years 2005 and 2006. (In millions, except per share data) Current assets Current liabilities Total assets Total liabilities Shares outstanding Retained earnings 2006 2005 $4,971.59 $3,184.24 2,515.39 1,481.93 13,498.01 11,792.99 2,591.38 1,743.00 1,368.51 1,404.18 4,541.35 2,822.64
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
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Transcribed Image Text:Compute and Interpret Altman's Z-scores
Following is selected financial information for ebay, for its fiscal years 2005 and 2006.
(In millions, except per share data)
Current assets
Current liabilities
Total assets
Total liabilities
Shares outstanding
Retained earnings
Stock price per share
Sales
2005 z-score =
2006
22.12
2005
$4,971.59 $3,184.24
2,515.39 1,481.93
13,498.01 11,792.99
2,591.38 1,743.00
1,368.51 1,404.18
4,541.35
2,822.64
33.07
5,969.74
4,552.40
Earnings before interest and taxes
1,435.77
1,441.18
Compute and interpret Altman Z-scores for the company for both years. (Do not round
until your final answer; then round your answers to two decimal places.)
2006 z-score =
10.98
46.22
Transcribed Image Text:Which of the following best describes the company's likelihood to go bankrupt given the z-
score in 2006 compared to 2007.
OThe z-score in 2006 is double the 2005 score. The z-score has increased sharply, which
suggests the company has greatly increased the risk of bankruptcy.
OThe z-score in 2006 is half of the 2005 score. The z-score has decreased sharply, which
suggests the company is in financial distress.
●The z-score in 2006 is double the 2005 score. The z-score has increased sharply, which
suggests the company has greatly lowered the risk of bankruptcy.
The z-score in 2006 is half of the 2005 score. Both z-scores are well above the score that
represents a healthy company.
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