In Altman's Z-score model,which of the following variables has a negative coefficient in the discriminant function that comes out of the model? (A negative coefficient would mean that the Z-score is decreasing in the variables. )
A)Working Capital/Total Assets
B)Market Value of Equity/Book Value of Debt
C)Sales/Total Assets
D)None of the above.

Question

Quizplus · Accepted Answer

Altman's Z-score model does not include a variable with a negative coefficient in its discriminant function. All the variables listed (Working Capital/Total Assets, Market Value of Equity/Book Value of Debt, Sales/Total Assets) are positively associated with the Z-score, meaning as they increase, the Z-score increases, indicating a lower probability of bankruptcy.

In Altman's Z-Score Model,which of the Following Variables Has a Negative