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In this problem you are required to compute and interpret bankruptcy prediction ratios. The information presented below relates to two competing technology firms Data
In this problem you are required to compute and interpret bankruptcy prediction ratios. The information presented below relates to two competing technology firms Data Systems Corp. and Analytics Inc. for years ended 2020 and 2021. They offer a wide range of tech products, repair services, etc. Recently they have faced a lot of competition from internet providers forcing prices to become significantly lower. In 2020 Analytics, Inc. filed bankruptcy. Parts of the financial statement for Analytics, Inc and Data Systems Corp. are shown below. Amounts are in thousands of dollars except per share amounts. Data Systems Corp Year Ended December 31 Analytics, Inc Year Ended December 31 2021 2020 2021 2020 Sales 40,023 35,934 11,744 12,430 Net Income (loss) Before tax and interest 2,290 2,161 (352) 22 Net Income (loss) 1,407 1,377 (321) 10 Current Assets 7,342 9.081 2,440 2,884 Total Assets 12,758 13,570 3,746 4,007 Current Liabilities 6,769 6,301 1,606 1,714 Total Liabilities 8,274 7,369 2,243 2,216 Retained Earnings 3,933 5,507 981 1,336 Common Shares Outstanding 411 481 169 171 Market Share Price 42 44.97 4.38 18.47 1. Calculate Altman's Z score for Data Systems Corp. and Analytics, Inc for both years 2020 and 2021. 2. Explain how the bankruptcy risk changed for Data Systems Corp. 3. Explain how the bankruptcy risk changed for Analytics, Inc. 4. Based on your analysis in 1 and 2 above, would you have predicted Data Systems or Analytics to file Bankruptcy? Explain.
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