Calculate Z Score With Altman’s Discrimant Function For A Firm

Question

Suppose that the financial ratios of a potential borrowing firm took the following values:
X1 = 0.3
X2 = 0
X3 = –0.30
X4 = 0.15
X5 = 2.1

Altman’s discriminant function takes the form:

Z = 1.2 X1 + 1.4 X2 + 3.3 X3 + 0.6 X4 + 1.0 X5

1. The Z score for the firm would be
    a.    1.64.
    b.    1.56.
    c.    2.1.
    d.    3.54.
    e.    2.96.


Summary

These short questions belong to Finance and it is about calculating the Z score for a firm with financial ratios for Altman’s discriminant function.

Total Word Count 66