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Calculate the altman z-score for the borrower

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Reference no: EM132661998

Suppose that the financial ratios of a potential borrowing firm take the following values: 1

Working capital/total assets ratio (X) = 0.75

Retained earnings/total assets ratio (X2) = 0.10

Earnings before interest and taxes/total assets ratio (X3) = 0.05

Market value of equity/book value of long-term debt ratio (X4) = 0.10

Sales/total assets ratio (X5) = 0.65

Calculate the Altman's Z-score for the borrower in question. How is this number a sign of the borrower's default risk?

Reference no: EM132661998

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