Bank Essay

557 WordsOct 26, 20143 Pages
Analysis Report of Credit Risks of X, Y, and XX Banks in China Using Z-Score Models Z-Score model is commonly used to predict the possibility of default of a firm. Z-score is higher, it is lower possibility of default, whereas Z-score is lower, it is higher possibility of default. Based on the following Z-Score models, calculate and explain the Z-value during 2009-2013 using financial variables of one casino firm in Macau. A. Altman's Z-Score Model [pic] where, [pic]Working Capitals/Total Assets [pic]Retained Earnings/Total Assets [pic]Earnings before Interests and Taxes/Total Assets [pic]Book Value of Total Equities/Book Value of Total Liabilities If Z-score is less than 1.10, it is predicted that companies probably happened to be bankruptcy, whereas if Z-score is higher than 2.60, it is predicted that companies impossibly happened to be bankruptcy. Companies with Z-score of between 1.10 and 2.60 stand in grey area of possibility of bankruptcy. B. Boyd and Graham's Z-Score Model [pic] Note: 1. ADZ denotes the possibility of bankruptcy of a firm. 2. Average ROE is that net income is scaled by the average of the beginning balance of total equities and the ending balance of total equities. 3. Using ROE over the period of 2009-2013 to calculate standard deviation of ROE. C. Goyeau and Tarazi's Z-Score Model [pic] Note: 1. ZP denotes the possibility of bankruptcy of a firm. 2.[pic]proxies the portfolio risk and[pic]expresses leverage risk. 3. Average ROA is that net income is scaled by the average of the beginning balance of total assets and the ending balance of total assets. 4. Average(total equities /total assets) is that average of the beginning ratio of total equities to total assets and the ending ratio of total equities to total assets 5. Using ROA over the period of 2009-2013 to calculate standard

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