In your first Bloomberg task you will have to use Altman’s Z score to determine if companies Boeing is going to fail in the near future.For more information, see: http://en.wikipedia.org/wiki/Altman

Bloomberg Task 1 In your first Bloomberg task you will have to use Altman’s Z score to determine if companies are going to fail in the near future. Here is a description of the Altman’s Z score: “The Z-Score formula for predicting bankruptcy was publish ed in 1968 by Edward Altman , who was at the time, an Assistant Professor of Finance at New York University. The formula may be used to predict the probability that a firm will go into bankruptcy within two years. Z -Scores are used to predict corporate defa ults and an easy -to-calculate control measure for the financial distress status of companies in academic studies. The Z -Score uses multiple corporate income and balance sheet values to measure the financial health of a company. In its initial test, the Alt man Z -Score was found to be 72% accurate in predicting bankruptcy two years prior to the event. In a series of subsequent tests covering three different time periods over the next 31 years (up until 1999), the model was found to be approximately 80 -90% acc urate in predicting bankruptcy one year prior to the event. ” For more information, see : http://en.wikipedia.org/wiki/Altman_Z -score. The f ollowing is the formula for most public companies (there are small differences for financial companies, private compa nies as so on) Z=1.2X 1+1.4X 2+3.3X 3+0.6X 4+0.999X 5 X1 = Working Capital / Total Assets X2 = Retained Earnings / Total Assets X3 = EBIT / Total Assets X4 = Market Value of Equity /Book Value of Total Liabilities X5 = Sales/ Total Assets A Z score higher than 2.99 is considered a safe score ; between 1.8 and 2.99 it is a grey area ; below 1.8 is the danger area . Each of you were assigned a “blue chip” company. You will need to find a company that is in more danger than blue chips. Bloomberg uses a system of rankings and computes the probability of default. It is under the function DRSK. The following grab shows an example. You will select companies with HY 2 and above. Those companies have higher probabilities of default. To s elect such companies I suggest that you search for companies that have bonds rated CCC - to CCC+. To do so you will need to go to CORP and do a search. I suggest the following fields for your search. However, any other way you devise to select companies with a high HY is fine by me. Once you have the second company you will have to compute the Z scores for the past three years for both companies. You will compare the scores between the “blue chip” and the “danger zone” company and determine if the Z sc ore you computed is similar with the one that you can find for both companies in Bloomberg. In addition, you will see if the Z score you computed is correlated with the probability of default that Bloomberg computed in DRSK. As a conclusion you will need to make a prediction if the danger zone company will default in the next two years. You will present your results in a format that will include your computations, your comments and the necessary Bloomberg grabs that show your work (mainly the DRSK grabs o f your two companies and some grabs showing an example on how you extracted the relevant data.) You will have to submit the assignment as a word document through Blackboard by the due date.