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Altman Z Score for General Motors

Calculate GM's Altman Z-Score. Show your calculations.

Based on the Z- Score:
Do you predict that GM will go bankrupt in the near-term? Explain

Based on your calculations, would you agree or disagree with Lutz that GM is over the worst? Explain in detail.

Solution Preview

Z Score=(EBIT/Total assets)*3.3+(net sales/total assets)*0.99+(Equity/Total Liabilities)*0.6+((Current Assets-Current Liabilities)/TOTAL ASSETS))*1.2+(Retained Earnings/Total Assets)*1.4

=(12,834/247,710)*3.3+(9,469/247,710)*0.99+(15,565/232,145)*0.6+((60,135-70,308)/247,710)*1.2+(-39,392/247,710)*1.4

=0.0518*3.3 + 0.0382*0.99 + 0.067*0.6 + (-10173/247,710)*1.2 + -0.159*1.4

=0.17094 + 0.037818 + 0.0402 + -0.041068*1.2 + -0.2226

=0.17094 + ...

Solution Summary

The solution is an Altman Z-Score for General Motors which predicts the potential for the company bankrupting.

$2.19