Complete the following tasks:

a. Consider the following worksheet with information extracted from a financial statement:

2018	Assets	Liabilities	Equity
Reported ($)	500 000	100 000	400 000

An analyst makes an adjustment that decreases goodwill by $100 000 and equity (profit) by $100 000. This goodwill was acquired on consolidation, hence there are no tax adjustments. Using the worksheet approach, what would be the change in the debt to assets ratio?

b. Consider the following information:

• Net working capital/total assets = 0.9
• Retained earnings/total earnings = 0.15
• EBIT/total assets = 1.1
• MV of equity/BV of total liabilities = 2
• Sales/total assets = 2.5

Compute the Z-score. Is there a likelihood of financial distress?