Exhibit 5.21 presents selected financial data for Harvard Industries and Marvel Entertainment for fiscal Year 5 and Year 6. Harvard Industries manufactures automobile components that it sells to automobile manufacturers. Competitive conditions in the automobile industry in recent years have led automobile manufacturers to put pressure on suppliers such as Harvard Industries to reduce costs and selling prices. Marvel Entertainment creates and sells comic books, trading cards, and other youth entertainment products and licenses others to use fictional characters created by Marvel Entertainment in their products. Youth readership of comic books and interest in trading cards have been declining steadily in recent years. Marvel Entertainment recognized a significant asset impairment charge in fiscal Year 6.
Required
a. Compute Altman's Z-score for Harvard Industries and Marvel Entertainment for fiscal Year 5 and Year 6.
b. How did the bankruptcy risk of Harvard Industries change between fiscal Year 5 and Year 6? Explain.
c. How did the bankruptcy risk of Marvel Entertainment change between Year 5 and Year 6? Explain.
d. Which firm is more likely to file for bankruptcy during fiscal Year 7? Explain using the analyses from Part b.