More importantly to be able to interpret the results

Assignment Help Financial Accounting

Reference no: EM131217684

A. The Z Score is an important tool for the analyst to use. It is very important to be able to first calculate the score, but even more importantly to be able to interpret the results. For instance, in the text we are given the guideline of 2.675 as being the standard by which firms can be judged. If a firm has a Z Score below 2.675 then the assumption is the firm may possess characteristics similar to a firm that is likely to fail in the near future. Thus, the Z Score provides some measure of the expectation that a firm will go into bankruptcy. A Z Score in excess of 2.675 indicates the firm has the characteristics of a firm that is likely to continue to succeed into the future.

It may be very difficult to complete analysis of different firms that may have a wide range of Z Scores. For instance, we may find it difficult to compare a firm with a 2.65 Z Score with one that has a 2.85 Z Score, or to compare one with a Z Score of 3.00 to one with a Z Score of 3.10.

What are your thoughts on this type of comparisons?

B. Would you invest in Apple? We all speak numbers and feel a little bit better when the numbers are in our favor but we never know where they may or may not go. A publicly traded company with a Z score below 1.8 is nearing bankruptcy but Apple has calculated a 4.16 Z score. Is this a safe investment? What are your thoughts?

Reference no: EM131217684

Questions Cloud

Null hypothesised-difference between financial statements : A researcher has null hypothesised that "there is no significant difference between financial statements that are prepared under the provisions of the conceptual framework of accounting and those that are not" What do you think is the expected outcom..

What are the frequencies of the various genotypes : What are the frequencies of the various genotypes and various phenotypes in this population? Assume Hardy-Weinberg equilibrium - What is the minimum codon size in this genetic code?

What are the major conflicts in the aeneid : What are the major conflicts in The Aeneid? Go beyond just Dido and Aeneas, Greeks and Trojans, to consider other less obvious ones. What types of conflicts (physical, moral, intellectual, or internal) can you detect?

Are credit cards or debit cards money : 1. Are credit cards or debit cards money? Explain your answer. 2. "When the Fed makes an open market purchase of government securities, the quantity of money will eventually decrease by a fraction of the initial change in the monetary base." Is th..

More importantly to be able to interpret the results : The Z Score is an important tool for the analyst to use. It is very important to be able to first calculate the score, but even more importantly to be able to interpret the results. For instance, in the text we are given the guideline of 2.675 as bei..

Compute ending inventory-cost of goods sold and gross profit : Chris’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2017, Chris adopted dollar-value LIFO and decided to use a single inventory pool. Calculate price index. Compute ending inventory, cos..

Consider cross-cultural and multinational implications : Convince your audience to invest capital resources to develop the product or service you intend to sell and explain your rationale. See Figure 9.5 - Persuasive Message Using AIDA model.

Why is change necessary for survival for todays organization : Why is change necessary for survival for today's organizations?- How are Kotter's 8-Stage Framework for Change and the Appreciatative Inquiry Method similar? Explain how they are different.

How do dss facilitate use of analytics : What are analytics? How do DSS facilitate use of analytics? How does bounded rationality impact your decisions each day?

User Account

All Pages