Question

Question 2 Not complete Mark 1.33 out of 4.00 P Flag question Compute and interpret Altman's Z-scores Following is selected financial information for eBay Inc., for its fiscal years 2016 and 2015. (in millions, except per share data) 2016 2015 Current assets $ 8.875 $7.904 Current liabilities 3,847 2,263 Total assets 23,847 17,755 Total liabilities 13,30B 11,179 Shares outstanding 530 741 Retained earnings 14,959 7.713 Stock price per share 29.69 27.48 Sales 8,979 8,592 Earnings before interest and taxes 2,325 2,197 Compute and interpret Altman Z-scores for the company for both years. (Do not round until your final answer then round your answers to two decimal places.) 2016 2-score = 0 x 2015 z-score = 0 x Which of the following best describes the company's likelihood to go bankrupt given the 2-score in 2015 compared to 2016 The Z-score in 2016 decreased slightly. Z-scores for both years are in the gray area indicating some risk of bankruptcy. The Z-score in 2016 Increased slightly, which suggests the company's risk of bankruptcy has increased. The z-score in 2016 increased slightly. Z-scores for both years are in the gray area indicating some risk for bankruptcy The Z-score in 2016 decreased slightly, which suggests the company's risk of bankruptcy has decreased Mark 1.00 out of 1.00 Check

Answer 1

Solution:- 2016 Z-score = 2.5 2015 Z-score = 2.9u. Explanation: 2016 Z-score - 1.2 A + 1.4 0 + 3.36 +0.6 0.1.0 = 1.2($0.200 + 1.4 (0.623+3.360.09) €0.6(1.18) +1.0(0.5) 20-252 +0.868+0.297+0.708 +0.37. 32.5 where working capital = $5,028 $0.21 millions : Tobal Assers $23,927 = $0.21 millions BI Retained Earnings / Total Assets : $14,959/$23,941 30.62 millions 6- Earnings before Interests and taxes $2325 = $0.09 millions - Total Assets - hanket value of Equity $15, 135. 1 $1118 millions BOOK value of Total Liabilities $13,308 $23,947

E = Sales Total ASSEES - 280.37 millions $23,847 - 2015 z-score = 1.2A + 1.48 +3.38 +0.6 D + 1.6€ = 1.210.31) + 1 ulo.43)+' 3.3(0-12) +0.6(1-82)+10 (048) = 0.372 + 0.602 +0.396.71.092 +0.48 = 2.94 where A = working capital / Total Assets - -$5.641 $17,755 2$0.31 millions R- Retained Earnings Total Assets = $1,113 =$0.43 millions $17,755 Earnings before Interests and taxes - 525197-$0.12 millions Total Asselis $17,755 D=.ma Market value of Equity . BOOK veilue of Liabilities. $20,562.68 11.82 millions $11,179 Sales Total Assets = $8,592 Total Arc ar $0.48 millions

Notes Dworking capital = current Assets - Current Liabilities 2) Merket value of Equity = shores outstanding y stock price per share. 3) In both 2015 and 2016, z-score is less that 3, that means eBay, he is likely to declare bankruptcy.

Hit the LIKE Button.