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Altman’s original Z-score bankruptcy model takes five key ratios into account: a. working capital / total assets b....

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Finance

Altman’s original Z-score bankruptcy model takes five key ratiosinto account:

a. working capital / total assets

b. retained earnings / total assets

c. earnings before interest and taxes / total assets

d. market value of equity / total liabilities

e. sales / total assets

Discuss the reasons why these ratios are linked to theprobability of going into bankruptcy, and comment on their relativeimportance.

Answer & Explanation Solved by verified expert
4.2 Ratings (551 Votes)
Altmans original Zscore bankruptcy model takes following five key ratios into account to analyses the probability of the bankruptcy in any company These ratios are working capital total assets retained earnings total assets earnings before interest and taxes total assets    See Answer
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