Reference no: EM132636840
Compute and Interpret Altman's Z-scoresFollowing is selected financial information for Netflix, for 2018 and 2017. $ thousands, except per share data
2018 2017
Current assets $9,694,135 $7,669,974
Current liabilities 6,487,320 5,466,312
Total assets 25,974,400 19,012,742
Total liabilities 20,735,635 15,430,786
Shares outstanding 436,598,597 433,392,686
Retained earnings 2,942,359 1,731,117
Stock price per share 267.66 191.96
Sales 15,794,341 11,692,713
Earnings before interest and taxes 1,605,226 838,679
Problem 1: Compute and interpret Altman Z-scores for the company for both years. (Do not round until your final answer; then round your answers to two decimal places.)
Problem 2: Which of the following best describes the company's likelihood to go bankrupt given the z-score in 2017 compared to 2018.
Option 1: The z-score in 2018 increased. Z-scores for both years are in the gray area indicating some risk of bankruptcy.
Option 2: The z-score in 2018 increased, which suggests the company's risk of bankruptcy has increased.
Option 3: The z-score in 2018 increased. Z-scores for both years indicate low bankruptcy potential in the short term.
Option 4: The z-score in 2018 decreased, which suggests the company's risk of bankruptcy has decreased.
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