Question II

using the Altman's formula below

Z = 1.2X1 +1.4X2. +3.3X3 + 0.6X4 + 1.0X5

where X1 =Working capital28/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

Suppose that the financial ratios of a potential borrowing firm took the following values:

X1 =.2 X2 =0 X3 =-.20

X4 =.10

X5 = 2.0

will you provide the loan to this borrower?