Bankruptcy Predictor Model Message Board

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Strategies & Market Trends : Bankruptcy Predictor Model

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To: Razorbak who wrote (180)	3/28/1999 12:40:00 AM
From: Q.	Read Replies (3) of 477

MVIS gets a high Z score mainly because it has very little assets, and partly because it has a comparatively high market cap. It's a development stage company. And a story stock. As I've noted before, I think the Altman scheme is not suitable for analyzing development stage companies. A lot of development stage co.'s have few assets and few liabilities. This will always give you a high Z score. There's nothing like dividing by zero to give you a big number, is there? Having a bloated market cap, which is typical of story stocks, helps drive up the Z score too. In this case, the high Z score doesn't mean that the co. is safe from bankruptcy. In fact, a co like MVIS with cash burn and a tiny working capital has little standing between it and bankruptcy except the prospect of raising funds by selling equity.

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