Bankruptcy Risk and Z-Score Analysis Following are selected ratios for JetBlue A

Question

Bankruptcy Risk and Z-Score Analysis
Following are selected ratios for JetBlue Airways for two recent fiscal years.

Bankruptcy Risk and Z-Score Analysis Following are selected ratios for JetBlue Airways for two recent fiscal years. Ratio Current ratio Working capital to total assets Retained earnings to total assets EBIT to total assets 2010 2009 1.253 1.326 0.045 0.055 0.033 0.019 0.055 0.043 Market value of equity to total liabilities 0.390 0.035 0.712 0.555 Sales to total assets Compute and interpret Altman Z-scores for the company for both years.(Do not round until your final answer; then round your answers to two decimal places.) 2010 z-score0 2009 Z-score0

Explanation / Answer

Z Score helps is finding the if the company is heading towards bankruptcy or not

Z score=1.2*(Working capital/Total Asset)+1.4*(Retained earning/ Total Asset)+3.3*(EBIT/Total Asset)+0.6*(Market valueof equity to total lliability)+1*(Sales to total asset)

For 2010 it will be= 1.2*0.045+1.4*0.033+3.3*0.055+0.6*0.390+1*0.712 =1.23

For 2009 it will be= 1.2*0.055+1.4*0.019+3.3*0.043+0.6*0.035+1*0.555 =0.81

Since Z score in both the year is below 1.80,company is likely to be headed towrds Bankruptcy

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