Answer to Question #122120 in Finance for lastone

Question #122120
The Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company. Assess the credit risk (z-score) of a potential borrowing firm with the following financial ratios: X1 = 0.2, X2 = 0, X3 = 0.2, X4 = 0.1, X5 = 2.0
1
Expert's answer
2020-06-17T10:26:49-0400

Details:

If,

X1=0.2 (A)

X2=0 (B)

X3=0.2 (C)

X4=0.1 (D)

X5=2.0 (E)

Z score of the potential borrowing firm can be calculated using Altmans Z score formula,

Z score = 2.96

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