Which variable has the LARGEST weight in Altman's Z-Score formula?

Question

BlackTom AI · Accepted Answer

The provided data for this question appears incomplete: there are no answer options listed to evaluate, so I cannot analyze each option as asked.

However, I can explain the underlying concept that the question references. In Altman's Z-Score model, particularly the version used for private manufacturing firms (the Z' score), the formula is typically a weighted sum of five financial ratios: X1, X2, X3, X4, and X5, with corresponding weights 1.2, 1.4, 3.3, 1.0, and 0.6 respectively. Among these, X3 (which is EBIT/Total assets) carries the largest weight, 3.3, meaning it has the greatest influence on the overall Z-Score calculation.

If there were multiple options, you would compare their stated weights to see which one corresponds to the 3.3 coefficient for X3. Because the question explicitly asks for the variable with the largest weight, and the standard Altman Z-Score model assigns 3.3 to X3, this would be identified as the correct choice in a typical multiple-choice setup.

Without the actual options, I can’t definitively label which option matches X3 with weight 3.3, but the canonical answer in the classic private firm Z-Score is that X3 (EBIT / Total assets) has the largest weight of 3.3.

BU.231.710.51.FA25 PoP Quiz - 1 (Week 4)

Which variable has the LARGEST weight in Altman's Z-Score formula?

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