question archive The Here Today Corporation has applied to your bank for a loan
The Here Today Corporation has applied to your bank for a loan
Subject:FinancePrice: Bought3
The Here Today Corporation has applied to your bank for a loan. You have their financial statements and the Z-score model of:Z = 6.56*(Net Working Capital/Total Assets) + 3.26*(Accumulated Retained Earnings/Total Assets) + 1.05*(EBIT/Total Assets) + 6.72*(Book Value of Equity/Total Liabilities) where:Z < 1.23="" predicts="" bankruptcy;="" z="" between="" 1.23="" and="" 2.90="" indicates="" a="" gray="" area;="" and="" z=""> 2.90 indicates no bankruptcy.From the financial statements, you gathered the following:Net working capital $237,500Accum. Retained Earnings: $120,000BV of equity: $950,000Total assets: $4,750,000EBIT: $261,250Total Liab.; $3,800,000Should the bank lend to Here Today? Why or why not? Base your decision on the analysis of the financials listed above.
