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Credit risk or default remains the primary risk exposure of financial institutions. Typically, the assets held by financial institutions are issued by various entities that

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Credit risk or default remains the primary risk exposure of financial institutions. Typically, the assets held by financial institutions are issued by various entities that have non-zero probabilities of default, for example, sovereigns, municipalities, NGOs, corporations (for profi and not-for-profit), and individuals. While there are several acceptable approaches to estimating default risk, one of the most popular is the Altman Z-Score. The Altman Z-Score was developed by Edward Altman, a professor at the Leonard N. Stern School of Business of New York University. The purpose of the Z-Score Model is to measure a company's financial health and to predict the probability that a company will collapse within 2 years. It is proven to be very accurate to forecast bankruptcy in a wide variety of contexts and markets. Past studies report that the model has 72%80% reliability of predicting default. While there are several versions of the Z-score model, the most popular approach is: Z=1.21+1.42+3.33+0.64+1.05,where X1 = Working Capital / Total Assets. X2 = Retained Earnings / Total Assets. X3 = Earnings Before Interest and Taxes / Total Assets. X4 = Market Value of Equity / Book Value of Total Liabilities. X5 = Sales / Total Assets. You have been asked to prepare a presentation for a client to illustrate the Altman Z-Score model. To accomplish this goal, you must estimate the Z-score for two (2) publicly traded companies - you cannot use Under Armour as one of your companies. This will entail the following tasks: - Obtain the necessary financial data for each company from the SEC's EDGAR (Electronic Data Gathering, Analysis, and Retrieval) System. - Develop an Excel-based, Z-Score calculation for each firm. - Provide a summary of your analysis including a brief description of the Altman Z-score and your assessment of the probability of default for each firm

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