Answer to Question #83065 in Economics for nesbid

Question

The Z – score model uses 5 variable illustrate the model giving the
reasons for the choice of the variable used.

Answer 1

Z-scores are used to predict corporate defaults and an easy-to-calculate control measure for the financial distress status of companies in academic studies. The Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company.

The Z-score is a linear combination of four or five common business ratios, weighted by coefficients.

Source:

https://en.m.wikipedia.org/wiki/Altman_Z-score