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2. For private firm, Altman adjusts the public model by changing the numerator for the variable X4 from the market value of equity to the book value of equity. The revised model follows: Where: X1 = Net Working Capital/Total assets X2 = Retained Earnings/Total Asset X3 = Earnings before interest and taxes/Total Assets X4 = Book value of equity/Book value of Total Liabilities X5 = Sales/Total Assets The model predict bankruptcy when Z < 1.23. The range between 1.23 and 2.90 is labeled the "grey area". Independent Variable KLM, Inc. - 0.115 0.895 - 0.075 1.250 XYZ, Inc. ABC, Inc. XI X2 X3 0.075 0.767 0.095 2.500 0.900 - 0.321 0.605 -0.108 1.125 X4 XS 1.286 0.710 The following table presents the independent variables from the three companies at the end of 2011. a) Calculate Altman Z-score for each company and interpret the results. b) Calculate the debt ratio for each of the companies. c) Explain the impact of increase debt ratio to Altman Z-score.

2. For private firm, Altman adjusts the public model by changing the numerator for the variable X4 from the market value of equity to the book value of equity. The revised model follows: Where: X1 = Net Working Capital/Total assets X2 = Retained Earnings/Total Asset X3 = Earnings before interest and taxes/Total Assets X4 = Book value of equity/Book value of Total Liabilities X5 = Sales/Total Assets The model predict bankruptcy when Z < 1.23. The range between 1.23 and 2.90 is labeled the "grey area". Independent Variable KLM, Inc. - 0.115 0.895 - 0.075 1.250 XYZ, Inc. ABC, Inc. XI X2 X3 0.075 0.767 0.095 2.500 0.900 - 0.321 0.605 -0.108 1.125 X4 XS 1.286 0.710 The following table presents the independent variables from the three companies at the end of 2011. a) Calculate Altman Z-score for each company and interpret the results. b) Calculate the debt ratio for each of the companies. c) Explain the impact of increase debt ratio to Altman Z-score.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
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2. For private firm, Altman adjusts the public model by changing the numerator for the variable X4 from the market value of equity to the book value of equity. The revised model follows: Where: X1 = Net Working Capital/Total assets X2 = Retained Earnings/Total Asset X3 = Earnings before interest and taxes/Total Assets X4 = Book value of equity/Book value of Total Liabilities X5 = Sales/Total Assets The model predict bankruptcy when Z < 1.23. The range between 1.23 and 2.90 is labeled the "grey area". Independent Variable XYZ, Inc. KLM, Inc. - 0.115 0.895 - 0.075 1.250 ABC, Inc. XI X2 X3 0.075 0.767 0.095 2.500 0.900 - 0.321 0.605 - 0.108 1.125 X4 X5 1.286 0.710 The following table presents the independent variables from the three companies at the end of 2011. a) Calculate Altman Z-score for each company and interpret the results. b) Calculate the debt ratio for each of the companies. c) Explain the impact of increase debt ratio to Altman Z-score.
Transcribed Image Text:2. For private firm, Altman adjusts the public model by changing the numerator for the variable X4 from the market value of equity to the book value of equity. The revised model follows: Where: X1 = Net Working Capital/Total assets X2 = Retained Earnings/Total Asset X3 = Earnings before interest and taxes/Total Assets X4 = Book value of equity/Book value of Total Liabilities X5 = Sales/Total Assets The model predict bankruptcy when Z < 1.23. The range between 1.23 and 2.90 is labeled the "grey area". Independent Variable XYZ, Inc. KLM, Inc. - 0.115 0.895 - 0.075 1.250 ABC, Inc. XI X2 X3 0.075 0.767 0.095 2.500 0.900 - 0.321 0.605 - 0.108 1.125 X4 X5 1.286 0.710 The following table presents the independent variables from the three companies at the end of 2011. a) Calculate Altman Z-score for each company and interpret the results. b) Calculate the debt ratio for each of the companies. c) Explain the impact of increase debt ratio to Altman Z-score.
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