Page 45 - MAC4861_2 Finance class slides part 2
P. 45
BUSINESSES IN DIFFICULTY
Illustration example
Suggested solution
• (a) Yes. Z-scores less than 1,8 shows a high risk of short term
failure and A-scores greater than 25 indicate that a company
is likely to fail.
• (b) No. Z-scores less than 1,8 shows a high risk of short term;
however, A-scores less than 25 indicate that a company is not
in danger of failing.
• (c) No (not a high risk). Z-scores between 1,8 and 2,99
indicate that a company is at a potential risk of failing and an
A-score of 25 or less indicate that a company is not in danger
of failing.
• (d) No. A-scores greater than 25 indicate that a company is
likely to fail; however, Z-scores greater than 2,99 show a low
risk of failing
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