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  • Z 1.2%T + 1.4%T + 3.3%T + 0.6%T + .999%T

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    rishad30
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    The model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies. Companies with ZScores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. Cores in between 1. And 3 lie in a grey area.

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    z score

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    The model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies. Companies with ZScores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. Cores in between 1. And 3 lie in a grey area.

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    Attribution Non-Commercial (BY-NC)
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    Sinalizar o conteúdo como inadequado
    11 visualizações1 página

    Z 1.2%T + 1.4%T + 3.3%T + 0.6%T + .999%T

    Enviado por

    rishad30
    The model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies. Companies with ZScores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. Cores in between 1. And 3 lie in a grey area.

    Direitos autorais:

    Attribution Non-Commercial (BY-NC)
    Baixe no formato DOCX, PDF, TXT ou leia online no Scribd
    Sinalizar o conteúdo como inadequado
    de 1

    A predictive model created by Edward Altman in the 1960s.

    This model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies. The formula may be used to predict the probability that a firm will go into bankruptcy within two years.

    Generally speaking, the lower the score, the higher the odds of bankruptcy. Companies with ZScores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. cores in between 1.8 and 3 lie in a grey area. The original Z-score formula was as follows: Z = 1.2%T1 + 1.4%T2 + 3.3%T3 + 0.6%T4 + .999%T5 Z = 0.012T1 + 0.014T2 + 0.033T3 + 0.006T4 + 0.009T5. 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 power. T3 = Earnings Before Interest and Taxes / Total Assets. Measures operating efficiency apart from tax and leveraging factors. It recognizes operating earnings as being important to longterm viability. T4 = Market Value of Equity / Book Value of Total Liabilities. Adds market dimension that can show up security price fluctuation as a possible red flag. T5 = Sales/ Total Assets. Standard measure for total asset turnover (varies greatly from industry to industry). Zones of Discrimination: Z > 2.99% -Safe Zones 1.81 %< Z < 2.99% -Grey Zones Z < 1.81% -Distress Zones

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