Does this mean that the earnings variable is 3.3 times

Reference no: EM131118225

Altman’s bankruptcy prediction model places a coefficient of 3.3 on the earnings before interest and taxes divided by total assets variable but a coefficient of only 1.0 on the sales to total assets variable. Does this mean that the earnings variable is 3.3 times as important in predicting bankruptcy as the asset turnover variable? Explain.

Reference no: EM131118225

Questions Cloud

What are the major reasons why companies change accounting : In recent years, the Wall Street Journal has indicated that many companies have changed their accounting principles. What are the major reasons why companies change accounting methods?

Calculate the amounts of these ratios for year 4 : Calculate the amounts of these ratios for Year 4. Assess the changes in the short-term liquidity risk of Hasbro between Year 2 and Year 4 and the level of that risk at the end of Year 4. Assess the changes in the long-term solvency risk of Hasbro bet..

Why might the levels of values in altman model appropriate : Why might the levels of values in Altman's model be more appropriate for predicting bankruptcy and changes in values in Beneish's model be more appropriate for identifying earnings manipulation?

Why is the characterization of nonsystematic risk as firm : Some writers refer to nonsystematic risk as firm-specific risk. Why is the characterization of nonsystematic risk as firm-specific risk a misnomer?

Does this mean that the earnings variable is 3.3 times : Altman’s bankruptcy prediction model places a coefficient of 3.3 on the earnings before interest and taxes divided by total assets variable but a coefficient of only 1.0 on the sales to total assets variable. Does this mean that the earnings variable..

What do they suggest about the mix of liabilities versus : What do these empirical results suggest about the mix of current and noncurrent liabilities for a financially healthy firm? What do they suggest about the mix of liabilities versus shareholders’ equity financing?

In what sense is the interest coverage ratio more a measure : In what sense is the interest coverage ratio more a measure for assessing short-term liquidity risk than it is a measure for assessing long-term solvency risk?

Identify the assumptions underlying the interest coverage : Identify the assumptions underlying the interest coverage ratio needed to make it an appropriate measure for analyzing long-term solvency risk.

Does your analysis in part a support this statement : Indicate whether each of the following independent transactions increases, decreases, or has no effect on each of the four debt ratios. The text states that analyst need not compute all four debt ratios each year because the debt ratios are highly co..

User Account

All Pages