# The following data are presented for zero company

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Chapter 4 / Exercise 4.26
Statistics for Management and Economics + XLSTAT Bind-in
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2.The following data are presented for Zero Company.Working capital\$ 60,000Total assets400,000Retained earnings20,000Earnings before interest and taxes40,000Market value of equity80,000Book value of total debt200,000Sales300,000Z score formula:Z = .012X1+ .014X2+ .033X3+ .006X4+ .010X5X1= Working Capital/Total AssetsX2= Retained Earnings (balance sheet)/Total AssetsX3= Earnings Before Interest and Taxes/Total AssetsX4= Market Value of Equity/Book Value of Total DebtX5= Sales/Total AssetsRequired:a.Compute the Z score for Zero Company.b.Considering the Altman model, comment on the likelihood that this firm will experience financial failure.ANS:
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Chapter 4 / Exercise 4.26
Statistics for Management and Economics + XLSTAT Bind-in
Keller Expert Verified
3.The following data are presented for Rocket Company.Working capital\$100,000Total assets300,000Retained earnings40,000Earnings before interest and taxes60,000Market value of equity100,000Book value of total debt220,000Sales400,000Z Score Formula:Z = .012X1+ .014X2+ .033X3+ .006X4+ .010X5X1= Working Capital/Total AssetsX2= Retained Earnings (balance sheet)/Total AssetsX3= Earnings Before Interest and Taxes/Total AssetsX4= Market Value of Equity/Book Value of Total DebtX5= Sales/Total AssetsRequired:a.Compute the Z score for Rocket Company.b.Considering the Altman model, comment on the likelihood that this firm will experience financial failure.ANS:
4.The following data are presented for Hillsdale Company.2010Net income as reported\$60,0002010Inventory reserve\$30,0002009Inventory reserve\$20,0002010Income taxes\$20,0002010Income before income taxes\$80,000Required:Compute the approximate income for 2010 if inventory had been valued at approximate current cost.ANS:
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