Question

Bankruptcy Risk and Z-Score Analysis

Following are selected ratios for JetBlue Airways for two recent
fiscal years.

Ratio | 2012 | 2011 |
---|---|---|

Current ratio | 0.684 | 1.153 |

Working capital to total assets | (0.072) | 0.031 |

Retained earnings to total assets | 0.061 | 0.043 |

EBIT to total assets | 0.053 | 0.046 |

Market value of equity to total liabilities | 0.278 | 0.251 |

Sales to total assets | 0.705 | 0.637 |

Compute and interpret Altman Z-scores for the company for both
years. (Do not round until your final answer; then round your
answers to two decimal places.)

2012 z-score = Answer

2011 z-score = Answer

Which of the following statements best describes the company's
Altman z-scores?

Both Altman z-scores are above 3.00 which indicate the company has a very high probability of bankruptcy.

Both Altman z-scores are below 1.80 which indicate the company has a very low probability of bankruptcy.

Both Altman z-scores are above 3.00 which indicate the company has a very low probability of bankruptcy.

Both Altman z-scores are below 1.80 which indicate the company has a very high probability of bankruptcy.

Answer #1

Altman Z Score is a tool for checking the credit strength test of an organisation

Altman Z Score Formula = 1.2A + 1.4B + 3.3C + 0.6D + 1E

Where, A = Working Capital / Total Assets

B = Retained earnings / Total Assets

C = Earnings Before Interest and Tax / Total Assets

D = Market Value of equity / Total liabilities

E = Sales / Total Assets

Z Score for 2011 = 1.2 x 0.031 + 1.4 x 0.043 + 3.3 x 0.046 + 0.6 x 0.251 + 1 x 0.637 = 1.0368

Z Score for 2012 = 1.2 x -0.072 + 1.4 x 0.061 + 3.3 x 0.053 + 0.6 x 0.278 + 1x 0.705 = 1.0457

Generally, Z Score below 1.8 means there is a high probability of the company going bankrupt and a score of more than 3 means there are less chances of a company going bankrupt

Hence, Both the Z Scores are less than 1.8 which indicate the company has high probability of bankruptcy

Bankruptcy Risk and Z-Score Analysis
Following are selected ratios for JetBlue Airways for two recent
fiscal years.
Ratio
2010
2009
Current ratio
1.253
1.326
Working capital to total assets
0.042
0.058
Retained earnings to total assets
0.033
0.019
EBIT to total assets
0.050
0.040
Market value of equity to total liabilities
0.390
0.320
Sales to total assets
0.573
0.503
Compute and interpret Altman Z-scores for the company for both
years. (Do not round until your final answer; then round your...

Bankruptcy Risk and Z-Score Analysis
Following are selected ratios for JetBlue Airways for two recent
fiscal years.
Ratio
2016
2015
Current ratio
0.604
0.705
Working capital to total assets
(0.069)
(0.104)
Retained earnings to total assets
0.258
0.194
EBIT to total assets
0.138
0.141
EBITDA to total assets
0.180
0.181
Market value of equity to total liabilities
1.380
1.342
Sales to total assets
0.699
0.742
Compute and interpret Altman Z-scores for the company for both
years. (Do not round until...

Compute and Interpret Altman's Z-scores
Following is selected financial information for eBay Inc., for its
fiscal years 2013 and 2012.
(In millions, except per share data)
2013
2012
Current assets
$ 23,283
$ 21,398
Current liabilities
12,639
10,924
Total assets
41,488
37,074
Total liabilities
17,841
16,209
Shares outstanding
1,294
1,286
Retained earnings
18,854
15,998
Stock price per share
54.87
51.00
Sales
16,047
14,072
Earnings before interest and taxes
3,371
2,888
Compute and interpret Altman Z-scores for the company for both...

ollowing are selected ratios for Logitech International SA for
the company’s 2016 and 2015 fiscal years. Compute and interpret
Altman Z-scores for both years.
Ratio
2016
2015
Working capital to total assets
0.386
0.390
Retained earnings to total assets
0.728
0.652
EBIT to total assets
0.097
0.108
Market value of equity to total assets
1.951
1.516
Market value of equity to total liabilities
4.580
3.235
Sales to total assets
1.524
1.405
Round answers to three decimal places.
Year
Z-score
2016...

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