Suppose that the financial ratios of a potential borrowing firm took the following values: X1 = Net working capital/Total assets = .15, X2 = Retained earnings/Total assets = .27, X3 = Earnings before interest and taxes/Total assets = .28, X4 = Market value of equity/Book value of long-term debt = .68, X5 = Sales/Total assets ratio = 0.9. Calculate and interpret the Altman's Z-score for this firm.
A) 1.92; Low risk
B) 2.01 Indeterminate
C) 2.79 Low risk
D) 2.79; Indeterminate
Correct Answer:
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