1. Analyze and evaluate the role of Altman's Z score in determining J. Crew's financial health and its interpretation (including Chapter 11 bankruptcy possibility). (use 2018 Annual report)

2. Share and solve the components and equation for the Altman Z score for J. Crew (use 2018 Annual report). (Please Show all the numbers used from the income statement/balance sheet, etc. and the calculation in detail).

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References

• Crew Group, Inc. (2019).Form 10-K 2018 Annual report.https://investors.jcrew.com/static-files/5d9bbabe-c660-40b7-a5f3-fadabc5af4bd
• Platt, H. D. (2004). Failure prediction. InPrinciples of corporate renewal(2nd ed., pp. 75-120). University of Michigan Press. file:///C:/Users/shash/OneDrive/Desktop/TUW/DBA%20Courses/DBA%20708/Module%202/HarlanDPlatt_2004_3FailurePrediction_PrinciplesOfCorporate.pdf (pp. 90-92)
• Young, A., & Wang, Y. (2010). Multirisk level examination of going concern modifications.Managerial Auditing Journal, 25(8), 765-791. file:///C:/Users/shash/Downloads/Multi-risk_level_examination_o.pdf (pp. 766)
• OpenTuition. (2017, January 20).ACCA P5 Predicting and Preventing Corporate Failure[Video]. Retrieved fromhttps://www.youtube.com/watch?v=HpslfTbEbho[11:48]
• Altman, E. I. (2018). Applications of distress prediction models: What have we learned after 50 years from the Z-Score models?International Journal of Financial Studies, 6(3), 70. file:///C:/Users/shash/Downloads/Applications_of_Distress_Predi%20(1).pdf

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The equation for the Altman Z score is: (Platt, 2004; OpenTuition, 2017)

Z = 1.2(X₁) + 1.4(X₂) + 3.3(X₃) + 0.66(X₄) + 1.0(X₅)

Where:

X₁ = Working Capital / Total Assets

X₂ = Retained Earnings / Total Assets

X₃ = Earnings Before Interest and Taxes / Total Assets

X₄ = Market Value of Equity / Total Liabilities

X₅ = Sales / Total Assets

Interpretation of scores:

< 1.81 are in danger

>= 3 financially sound

1.81-2.99 need further investigation

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Applying Altman's Z-Score to J.Crew
Variable	2019 Value	Coefficient	Product	Comment
Working capital/total assets		1.2
Retained earnings/total assets		1.4
EBIT/Total assets		3.3
Market value of equity/book value of liabilites		0.66
Sales/total assets		1
Z-score			?