The Z score bankruptcy prediction model uses balance

sheet and i
The Z-score bankruptcy prediction model uses balance sheet and income information to arrive
at a Z-Score, which can be used to predict financial distress:EBIT is earnings before interest
and taxes. MV Equity is the market value of common equity, which can be determined by
multiplying stock price by shares outstanding. Following extensive testing, it has been shown
that companies with Z-scores above 3.0 are unlikely to fail; those with Z-scores below 1.81 are
very likely to fail. While the original model was developed for publicly held manufacturing
companies, the model has been modified to apply to companies in various industries, emerging
companies, and companies not traded in public markets.Instructions(a) Use information in the
financial statements of a company like Walgreens or Deere & Co. to compute the Z-score for
the past 2 years.(b) Interpret your result. Where does the company fall in the financial distress
range?(c) The Z-score uses EBIT as one of its elements. Why do you think this income
measure is used?
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The Z score bankruptcy prediction model uses balance sheet and i
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