Protecting inherited wealth with informed investment decisions.
Eleanor, at 68, relies on her $1.8M IRA and $450K taxable accounts for income. She's risk-averse but wants to diversify beyond bonds. She is concerned about investing in individual stocks or corporate bonds without fully understanding their potential for financial distress or even bankruptcy, leading to significant losses that could jeopardize her retirement.
We employed the Altman Z-Score Calculator to analyze the financial stability of several companies Eleanor was considering for investment. By inputting their financial data, we identified one company with a high bankruptcy risk score (Z-Score of 1.1). Avoiding this investment protected approximately $50,000 of capital she had allocated to it. Additionally, we used the Tax Equivalent Yield calculator to find bonds that provided similar risk adjusted returns while offering a tax advantage for her.
The Altman Z-Score was calculated using publicly available financial statements. Key ratios like working capital to total assets and retained earnings to total assets were inputs. The Tax Equivalent Yield was calculated using Eleanor’s marginal tax rate.
$50,000 capital preservation by avoiding a high-risk investment identified via Z-Score analysis.
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