Concept explainers
Altman’s z-score Altman’s z-score is a financial tool for predicting insolvency in a business.
For a certain company, the z-score formula is
In this exercise, we assume that thre are 45, 000 outstanding shares at a price of $4.80 each.
a. Use L, for total liability, in dollard, and give a formula for the z-score for this company.
b. Would a larger total liability idicate a better or worese outlook for the company?
c. A z-score of 1.81 or lower indicates a high probability of insolvency. What is the
smallest value of L that will give a z-score that indicates a high probability on insolvency?
Trending nowThis is a popular solution!
Chapter 2 Solutions
Functions and Change: A Modeling Approach to College Algebra (MindTap Course List)
- A Troublesome Snowball One winter afternoon, unbeknownst to his mom, a child bring a snowball into the house, lays it on the floor, and then goes to watch T.V. Let W=W(t) be the volume of dirty water that has soaked into the carpet t minutes after the snowball was deposited on the floor. Explain in practical terms what the limiting value of W represents, and tell what has happened physically when this limiting value is reached.arrow_forwardContinued This is a continuation of Exercise 13. As we saw earlier, the stock turnover rate of an item is the number of times that the average inventory of the item needs to be replaced as a result of sales in a given time period. Suppose that a hardware store sells 80 shovels each year. a. Suppose that the hardware store maintains an average inventory of 5 shovels. What is the annual stock turnover rate for the shovels? How is this related to the yearly number of orders to the wholesaler needed to restock inventory? b. What would he the annual stock turnover rate if the store maintained an average inventory of 20 shovels? c. Write a formula expressing the annual stock turnover rate as a function of the average inventory of shovels, identify the function and the variable, and state the units.arrow_forward
- Functions and Change: A Modeling Approach to Coll...AlgebraISBN:9781337111348Author:Bruce Crauder, Benny Evans, Alan NoellPublisher:Cengage LearningAlgebra & Trigonometry with Analytic GeometryAlgebraISBN:9781133382119Author:SwokowskiPublisher:CengageAlgebra and Trigonometry (MindTap Course List)AlgebraISBN:9781305071742Author:James Stewart, Lothar Redlin, Saleem WatsonPublisher:Cengage Learning