Do we need to know these formulas? The LOS are quite obscure. Are you going to learn them (at least their components if not the parameter coefficients)?
No, and no.
No just the interpretation - Its good to have a low value in Beenish model (less chances of earning manipulation) & its good to have a high value in ALtman - Z score (less probability of default). Correct me if i am wrong.
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Certainly not. Just, as Paulian said, the interpretation.
Just be able to interpret them. I have a mnemotechnic way of remembering how they work:
Beneish and Altman scores get worse as they approach 0. The beneish model indicates a high probability of manipulation when you are higher than the critical value, and the altman score indicates a high probability of default if you’re below the lowest critical value (if you’re in between the test is inconclusive, and if you’re above, no probability of defaulting).
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Thanks! Very helpful!