Question

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 answers to two decimal places.)
2010 z-score = Answer

2009 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

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