Question
7. You work in the agricultural credit division of a major bank in Australia. An ASX listed agricultural company wants to obtain a loan from
7. You work in the agricultural credit division of a major bank in Australia. An ASX listed agricultural company wants to obtain a loan from your bank. You checked the financial reports of the bank and found that the company has the following: Net working capital /total asset = 0.12, Retained earnings/total asset = 0.02, EBIT/total assets = 0.2, Market value of equity/book value of total liability = 0.3, Sales/total asset = 0.4. Wold you give the loan to the company?
A. Yes, I will give the loan since the Altmans Z-score of 1.412 is lower than 1.8
B. Yes, I will give the loan since the Altmans Z-score is 1.412 is within the acceptable range
C. No, I will not give the loan since the Altmans Z-score of 1.412 is lower than 1.8, the risk of financial distress is high.
D. No, I will not give the loan because agricultural businesses are not viable in Australia anyway.
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