Compute and interpret Altman Z-scores for the company

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Reference no: EM132817253

Problem - Compute and Interpret Altman's Z-scores

Following is selected financial information for Netflix, for 2018 and 2017.

$ thousands, except per share data

2018

2017

Current assets

$9,694,135

$7,669,974

Current liabilities

6,487,320

5,466,312

Total assets

25,974,400

19,012,742

Total liabilities

20,735,635

15,430,786

Shares outstanding

436,598,597

433,392,686

Retained earnings

2,942,359

1,731,117

Stock price per share

267.66

191.96

Sales

15,794,341

11,692,713

Earnings before interest and taxes

1,605,226

838,679

Required -

1. Compute and interpret Altman Z-scores for the company for both years.

2. Which of the following best describes the company's likelihood to go bankrupt given the z-score in 2017 compared to 2018.

a. The z-score in 2018 increased. Z-scores for both years are in the gray area indicating some risk of bankruptcy.

b. The z-score in 2018 increased, which suggests the company's risk of bankruptcy has increased.

c. The z-score in 2018 increased. Z-scores for both years indicate low bankruptcy potential in the short terms.

d. The z-score in 2018 decreased, which suggests the company's risk of bankruptcy has decreased.

Reference no: EM132817253

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