Required:

a. Compute and compare the Altman Z-scores for both years. What explains the apparent trend?

b. Is the company more likely to go bankrupt given the Z-score in 2017 compared to 2016? Explain.

Selected balance sheet and income statement information for Aiello, Inc. follows. As of December 31, 2017 and 2016, there were approximately 525.5 million and 517.5 million shares outstanding. The company's stock closed at $73.79 on December 31, 2017 and $62.84 on December 31, 2016. Dividends paid (in millions) were $19,668 and $23,251 in 2016 and 2017, respectively. 2016 $89,066 23,732 112,798 Income Statement Year Ended December 31 (In millions) 2017 Net sales Products $94,078 Service 28,974 123,052 Cost of sales Products 58,789 Service 11,589 70,378 Gross Profit 52,674 Other income and expenses), net 1,078 Operating profit 53,752 Interest expense 740 Earnings before taxes 53,012 Income tax expense 7,951 Net earnings $45,061 55,981 10,873 66,854 45,944 788 46,732 630 46,102 7,078 $39,024 2017 2016 Balance Sheet December 31 (In millions) Assets Cash and cash equivalents Short-term investments Receivables Inventories Deferred income taxes Other current assets Total current assets Property, plant and equipment, net Investments in equity securities Goodwill Purchased intangibles, net Prepaid pension asset Other assets Total assets $ 16,976 6,716 18,316 10,684 6,444 4,980 64,116 17,696 5,846 27,788 2,240 6,440 13,076 $137,202 $ 13,240 3,584 16,376 | 8,456 4,928 3,228 49,812 15,396 3,248 25,568 2,688 4,120 11,252 $112,084 Table continued next page 2016 Table continued Balance Sheet-continued December 31 (In millions) 2017 Liabilities and stockholders' equity Accounts payable $ 7,992 Customer advances 17,324 Salaries, benefits and payroll taxes 5,900 Current maturities of long-term debt 808 Other current liabilities 5,688 Total current liabilities 37,712 Long-term debt 25,136 Accrued pension liabilities 8,388 Other postretirement benefit liabilities 5,108 Other liabilities 9,164 Total liabilities 85,508 Stockholders' equity Common stock, $1 par value per share 1,728 Additional paid-in capital 6,896 Retained earnings 49,338 Accumulated other comprehensive loss (6,212) Other (56) Total stockholders' equity 51,694 Total liabilities and stockholders' equity $137,202 $ 6,904 16,112 5,384 60 5,804 34,264 26,416 6,640 4,944 7,868 80,132 1,752 8,892 27,528 (6,128) (92) 31,952 $112,084