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Unformatted text preview: Z = 1.2T1 + 1.4T2 + 3.3T3 + .6T4 + .999T5. Where, T1 = Working Capital / Total Assets. Measures liquid assets in relation to the size of the company. T2 = Retained Earnings / Total Assets. Measures profitability that reflects the company's age and earning p T3 = Earnings Before Interest and Taxes / Total Assets. Measures operating efficiency apart from tax and l T4 = Market Value of Equity / Total Liabilities. Adds market dimension that can show up security price flu T5 = Sales/ Total Assets. Standard measure for sales turnover (varies greatly from industry to industry). Current Assets Current Liabilities Working Capital Total Assets Retained Earnings Earnings Before Interest and Taxes Market Value of Equity Total Liabilities Sales T1 = - 32610 / 91047 T2 = - 70610 / 91047 T3 = 27043 / 91047 T4 = - 86154 / 177201 T5 = 150603 / 91047 $41,324 $73,934 -$32,610 $91,047 -$70,610 $27,043 -$86,154 $177,201 $150,603 -0.36 -0.7755 0.3 -0.49 1.65 To assess any firm's likelihood of bankruptcy, we would compare their Z score with the predetermined cut Bankrupt less than 1.81 Zone of ignorance 1.81 - 2.99 Non bankrupt greater than 2.99 From the Altman score, it shows that the particular a reading around or below about 0.8, so there are great The true, some of GM's new models are selling well. But sales are down 5% this year and market share is was tried to deflect talk of a GM bankruptcy by pointing out that the struggling auto giant is raising plenty GMAC finance arm. In fact, GM needs a sales rebound to make its resurgence happen. That means gas pri look to brands like Saturn and Buick to even discover that GM's cars really are much improved. Avoiding Reference Z-Score Financial Analysis Tool, Retrieved on November 6, 2009 form http://en.wikipedia.org/wiki/Z-Sco http://finance.yahoo.com/q/bs?s=MTLQQ.PK&annual http://www.nysscpa.org/cpajournal/old/16641866.htm Lutz Says GM Is over the Worst, David Welch, Retrieved on APRIL 13, 2006 from http://www.businessw o the size of the company. ts the company's age and earning power. ting efficiency apart from tax and leveraging factors. It recognizes operating earnings as being important to long-term viability. that can show up security price fluctuation as a possible red flag. atly from industry to industry). 1.2 1.4 3.3 0.6 1 Z= -0.43 -1.09 0.98 -0.29 1.65 0.83 Z score with the predetermined cutoffs shown below. below about 0.8, so there are greater the chances of a firm suffering from financial difficulty for coming up couple of years. 5% this year and market share is hovering at 24% almost two points below its share this time last year. In the comments of Lut uggling auto giant is raising plenty of cash by selling off stakes in Japanese auto makers, and by the $14 billion sale of 51% of i rgence happen. That means gas prices need to stay low, so SUV sales don't take a hit like they did a year ago. Buyers need to gi lly are much improved. Avoiding a strike at its largest parts supplier, bankrupt Delphi, is another iceberg Wagoner needs to dod http://en.wikipedia.org/wiki/Z-Score_Financial_Analysis_Tool , 2006 from http://www.businessweek.com/autos/content/apr2006/bw20060413_540164.htm?campaign_id=rss_topStories ng important to long-term viability. for coming up couple of years. e last year. In the comments of Lutz he by the $14 billion sale of 51% of its ey did a year ago. Buyers need to give a other iceberg Wagoner needs to dodge. ?campaign_id=rss_topStories ...
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This note was uploaded on 07/26/2010 for the course MBA MBA 6001 taught by Professor Dino during the Spring '10 term at South Georgia College.
- Spring '10
- Working Capital