Quantitative Tool Interpretation

Question 1

Altman’s Z-Score (MDA)

Answer 1

Z > 3 - Financially Healthy
2.99 > Z > 1.8 - Gray, exposed to some risk of bankruptcy and financial distress
Z < 1.8 - financial distress, high risk of bankruptcy in short term

Question 2

Taffler Z-Score (MDA)

Answer 2

Z > 0 - financially solvent
Z < 0 - risk of failure

Question 3

Zmijewski X-Score (MDA)

Answer 3

X < 0 - firm does not have potential to become bankrupt
X > 0 - firm has potential to become bankrupt

Question 4

Ohlson Original Model (y-score, Logit Analysis)

Answer 4

• Input to bankruptcy calculation
• score ranges from 0 to 1, higher scores indicate a greater likelihood of bankruptcy. A score of 0.5 or above is generally considered to be a warning sign that the company is at risk of bankruptcy.`

Question 5

Beneish Model (Earnings Quality)

Answer 5

• M > -1.78 - earnings manipulation
• -2.22 < M < -1.78 - possible manipulation
• M < -2.22 - no earnings manipulation