Page 45 - Manac test 2 Cycle slides

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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