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Below is selected information for Radek Corp. and Kitts, Inc. for fiscal 2017. Compute each company's Z-score and provide an analysis of whether either company
Below is selected information for Radek Corp. and Kitts, Inc. for fiscal 2017. Compute each company's Z-score and provide an analysis of whether either company is expected to go bankrupt in the near future. (Round each computation to three decimal places. Z-Score = 1.2(A) + 1.4(B) + 3.3(C) + 0.6(D) + 1.0(E) Where: A = Working Capital (Current Assets - Current Assets) / Total Assets (Measures liquidity of firm) B= Retained Earnings / Total Assets (measures accumulated profits compared to assets) C= Earnings Before Interest & Taxes (EBIT) / Total Assets (measures how much profit the firms assets are producing) D= Market Value of Equity (Mkt. Cap. + Preferred Stock) / Total Liabilities (compares the company's value versus it's liabilities) E= Sales / Total Assets (efficiency ratio - measures how much the company's assets are producing in sales) Current assets Current liabilities Total assets Total liabilities Shares outstanding Retained earnings Stock price per hare Sales Earnings before interest and taxes Radek Corp. $783,140 495,691 1,287,598 682,855 211,000 346,988 $42.86 1,454,110 338,977 Kitts, Inc. $538,974 627,588 1,077,966 984,771 289,455 -75,412 $8.00 955,741 43,569 A Radek Z-score: .268; Kitts Z-score -0.099; Kitts is less likely to go bankrupt B Radek Z-score: 1.18; Kitts Z-score 0.878; Radek is more likely to go bankrupt Radek Z-score: 2.2; Kitts Z-score 12.2; Kitts is more likely to go bankrupt Radek Z-score: 10.5; Kitts Z-score 2.2; Kitts is more likely to go bankrupt
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