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					                                                  SOFTWARE INC.
                                               Z-SCORE CALCULATOR




                                       INTRODUCTION


          In the 1960's, Edward I. Altman developed the Bankruptcy Predictor Model, or Z-Score test.
          The Z-Score Test lets you use statistical techniques to predict the likelihood of bankruptcy within the
          next two years.

          Dr. Altman's test was developed using 66 companies, 33 failed and 33 successful. The test achieved
          an accuracy rate of 95%.

          The financial ratios come directly from a company's financial statements.

          Caution -- This prediction model is a tool for analysts, and is not meant to replace seasoned judgment.
          It will help an analyst determine whether further review may be necessary, and can be calculated over a
          number or years to determine whether the trend is downward -- if so, corrective action may enable the
          company to survive.




                                       METHODOLOGY


          Input the information from the company's financial statements into the highlighted cells of the 'Calculator'
          worksheet. The worksheet will calculate the Z-Score automatically.

          Then, compare your results to the standards shown in the bottom section of the 'Calculator' worksheet.




                                  WORKBOOK CONTENTS


          The workbook includes two worksheets
                   Introduction
                   Calculator




File = 21860f3e-f442-47c4-99a4-c556d7a311ec.xls                                                          1:28 AM 9/5/2011
                                                                 SOFTWARE INC.
                                                              Z-SCORE CALCULATOR




                                                                 INPUTS

                                                                                                  User -- complete highlighted fields

Income statement                        Net sales                                                                   100
                                        Operating income (income before interest and tazes -- EBIT)                   5

Balance sheet                           Current assets                                                               75
                                        Total assets                                                                125
                                        Current liabilities                                                          60
                                        Total liabilities                                                           100
                                        Retained earnings                                                            15

Market value                            Market value of equity                                                      140




                                                              CALCULATION

                                                                                         Amount        Factor    Result
EBIT / Total assets                                                                        0.04           3.3     0.13
Net sales / Total assets                                                                    0.8        0.999      0.80
Market value of equity / Total liabilities                                                  1.4           0.6     0.84
Working capital / Total assets                                                             0.12           1.2     0.14
Retained earnings / Total assets                                                           0.12           1.4     0.17




                                               RESULTS AND INTERPRETATION

                Results                 Your company's Z-Score                                        2.08


           Interpretation               Z-Score above 3.0                                         Company is financial sound

                                        Z-Score between 2.7 and 2.99                              Company needs to exercise caution

                                        Z-Score between 1.8 and 2.7                               Likely to go bankrupt within 2 years

                                        Z-Score below 1.8                                         Likelihood of bankruptcy is very high




File = 21860f3e-f442-47c4-99a4-c556d7a311ec.xls                                                                            1:28 AM 9/5/2011

				
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posted:9/5/2011
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