MNO Inc , a publicly traded manufacturing firm in the United States, has provided the following financial information in its application for a loan All numbers are in thousands of dollars Assets Liabilities and Equity Cash $ 30,000 Accounts payable $ 25,000 Accounts receivables 70,000 Notes payable 75,000 Inventory 110,000 Accruals 30,000 Long term debt 250,000 Plant and equipment 390,000 Equity 220,000 Total assets $600,000 Total liabilities and equity $600,000 Also assume sales $450,000 cost of goods sold $310,000 and the market value of equity is equal to the book value Also, retained earnings are $22,000 Altmans discriminant function is given by a What is the Altman discriminant function value for MNO Inc Recall that ( X 1 ) Working capital total assets ratio ( X 2 ) Retained earnings total assets ratio ( X 3 ) Earnings before interest and taxes total assets ratio ( X 4 ) Market value of equity book value of long term debt ratio ( X 5 ) Sales total assets ratio Net working capital Current assets Current liabilities Current assets Cash Accounts receivable Inventories Current liabilities Accounts payable Accruals Notes payable EBIT Revenues cost of goods sold b Based on the Altmans Z score only, should you approve MNO Inc 's application to your bank for a $500,000 capital expansion loan c If sales for MNO were $300,000, the market value of equity was only half of book value, and all other values are unchanged, would your credit decision change

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Posted on Oct 06, 2024

MNO Inc., a publicly traded manufacturing firm in the United States, has provided the following financial information in its application for a loan. All numbers

MNO Inc., a publicly traded manufacturing firm in the United States, has provided the following financial information in its application for a loan. All numbers are in thousands of dollars.

Assets Liabilities and Equity

Cash $ 30,000 Accounts payable $ 25,000

Accounts receivables 70,000 Notes payable 75,000

Inventory 110,000 Accruals 30,000

Long-term debt 250,000

Plant and equipment 390,000 Equity 220,000

Total assets $600,000 Total liabilities and equity $600,000

Also assume sales = $450,000; cost of goods sold = $310,000; and the market value of equity is equal to the book value. Also, retained earnings are $22,000.

Altmans discriminant function is given by:

a. What is the Altman discriminant function value for MNO Inc.? Recall that:

(X₁) = Working capital/total assets ratio

(X₂) = Retained earnings/total assets ratio

(X₃) = Earnings before interest and taxes/total assets ratio

(X₄) = Market value of equity/book value of long-term debt ratio

(X₅) = Sales/total assets ratio

Net working capital = Current assets - Current liabilities.

Current assets = Cash + Accounts receivable + Inventories.

Current liabilities = Accounts payable + Accruals + Notes payable.

EBIT = Revenues cost of goods sold

b. Based on the Altmans Z-score only, should you approve MNO Inc.'s application to your bank for a $500,000 capital expansion loan?

c. If sales for MNO were $300,000, the market value of equity was only half of book value, and all other values are unchanged, would your credit decision change?