Question

Fair-to-Midland Manufacturing, Inc. (FMM), has applied for a loan at True Credit Bank. Jon Fulkerson, the credit analyst at the bank, has gathered the following information from the company’s financial statements:

Total assets $109,000 EBIT 8,600 Net working capital 5,100 Book value of equity 36,000 Accumulated retained earnings 18,500 Sales 109,000

The stock price of FMM is $38 per share and there are 6,700 shares outstanding.

What is the Z-score for this company? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

Answer 1

Z score is a output of a credit strenth test that guesses publically traded company liklyholld of bankfupcy.

Z score can be calculated from 5 financial ratios that can be calulated from companys annual balance sheet.

	A	working captiall ratio	0.05
		working captial /total assets
		working capital	$       5,100.00
		total assets	$ 1,09,000.00
	B	retained earing ratio	0.17
		retined earning / total assets
		Accumalated retained earining	$     18,500.00
		total assets	$ 1,09,000.00
	C	EBIT to total sales ratio	0.08
		EBIT/ total sales
		EBIT	8600
		Total Sales	$ 1,09,000.00
	D	Market value to total llibility	1.88
		market vlaue of equity/total libiity
		Market vaue of equity	254600
		Total Libiity	135500
	E	Sales to total assets ratio	1.00
		sales/total assets
		sales	109000
		total assets	109000
		Z Score	2.682
		1.2A + 1.4B + 3.3C + 0.6D + 1.0E
		1.2*D2+1.4*D7+3.3*D12+0.6*D17+1*D22