1. Benny is the CFO of a company which manufactures custom car parts. The company, which started as a local car shop, has evolved into a regional product provider. Benny has been part of the team since he gained his CPA license and has helped the company manage the success it acquired. With the recent credit market situation, Benny wants to make sure his company will be able to meet the financial obligations it has committed to. Benny decides to calculate for the Altman Z Score; manufacturing has been hit hard enough that he feels he has to. With this decision, he begins assembling company financial reports to find the factors of the Altman Z Score equation as they relate to his company.
   • Working Capital = $5,000,000
   • Retained Earnings = $1,000,000
   • Operating Income = $10,000,000
   • Market Value of Equity = $2,000,000
   • Book Value of Total Liabilities = $500,000
   • Sales = $15,000,000
   • Total Assets = $3,000,000
   • Model A Z-Score = 0.717X1 + 0.847X2 + 3.107X3 +0.420X4 +0.998X5
   • X1 = working capital/total Assets. It measures the net liquid asset of a company relative to the total assets.
   • X2 = retained earnings/total Assets. It measures the financial leverage level of a company. X3 = earnings before interests and taxes/total Assets. It measures productivity of a companys total assets.
   • X4 = market value of equity/book value of total liabilities. It measures what portion of a companys assets can decline in value before the liabilities exceed the assets.

X5 = sales/total Assets. It measures revenue generating ability of a companys assets. Will Benny conclude that Bankruptcy is likely?