Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In this problem you are required to compute and interpret bankruptcy prediction ratios. The information presented below relates to two competing technology firms Data

image text in transcribedimage text in transcribedimage text in transcribed

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Accounting

Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng

11th edition

538480289, 978-0538480284

More Books

Students also viewed these Accounting questions

Question

CL I P COL Astro- L(1-cas0) Lsing *A=2 L sin(0/2)

Answered: 1 week ago

Question

gasgf sadgfdsf asfd

Answered: 1 week ago