When considering the results of an Altman Z-Score analysis a score of 2.20 would
ID: 2618598 • Letter: W
Question
When considering the results of an Altman Z-Score analysis a score of 2.20 would suggest?
The company is exposed to some risk of bankruptcy
The company is healthy and there is a low bankruptcy potential in both the short and long-term
The company is in financial distress and there is a high probability of bankruptcy in the short term future
The company is healthy and there is a low bankruptcy potential in the short-term
The company is exposed to some risk of bankruptcy
The company is healthy and there is a low bankruptcy potential in both the short and long-term
The company is in financial distress and there is a high probability of bankruptcy in the short term future
The company is healthy and there is a low bankruptcy potential in the short-term
Explanation / Answer
The correct answer is company is in financial distress & there is high probability of bankruptcy in the short term future. This is because:
When Z is 1.8 – 2.7, the company is likely to be bankrupt within 2 years.
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