Unit 2. Altman's Z-Score Model

What is the primary purpose of Altman's Z-Score Model?

• To predict the chances of a business going bankrupt

• To assess a company's market value

• To evaluate employee performance

• To predict stock prices

In which year was Altman's Z-Score Model developed?

• 1990

• 1983

• 1975

• 1968

How many financial ratios are combined in Altman's Z-Score Model?

• Seven

• Five

• Three

• Ten

What does a Z-score lower than 1.8 indicate?

• The company is highly profitable

• The company is in financial distress

• The company is in a safe zone

• The company is expanding rapidly

Which financial ratio is NOT part of the Z-score formula?

• Net Income/Total Assets

• Sales/Total Assets

• Market Value of Equity/Total Liabilities

• Working Capital/Total Assets

What does a Z-score of 3 or above signify?

• Moderate chance of bankruptcy

• High risk of bankruptcy

• Company is in financial distress

• Low risk of bankruptcy

Which model was specifically designed for private manufacturing companies?

• Original Model

• Model B

• Public Model

• Model A

What is the significance of the Retained Earnings/Total Assets ratio?

• It assesses the company's debt levels

• It shows the company's market share

• It indicates how much profit is retained for growth

• It measures a company's liquidity

What is the accuracy rate of the Z-score model in predicting bankruptcy two years in advance?

• 90%

• 50%

• 72%

• 85%

Which of the following is a key component of the Z-score formula?

• Current Assets/Current Liabilities

• Total Revenue/Total Assets

• Total Liabilities/Total Assets

• Earnings Before Interest and Tax/Total Assets