SWM - Mark Moore

Z-Score 4 3.5 3 2.5 2 1.5 1 0.5 0 2004 2005 2006 2007 2008 Schweitzer-Mauduit 2.8 2.35 2.17 2.06 2.01 Universal Corporation 2.38 2.42 2.32 2.71 3.39 Alliance One 1.36 1.79 0.72 1.75 1.6 Schweitzer-Mauduit Universal Corporation Alliance One Universal Corporation the last two years has had a z-score above the 2.67 allowing themto borrow money at the lowest interest rates in the industry. Schweitzer-Mauduit’s z-score overthe last four years has fallen into the “gray area” giving them higher interest rates compared toits competitor Universal Corp and a possible chance of bankruptcy in the future. Unfortunatelyfor Alliance One, they fall way below the “grey area” for the past several years putting thecompany into a serious chance of bankrupt in future years. Overall, Schweitzer-Mauduit’s z-score has been slowly declining over the past five years. Even though it has not fallen below1.8, the score of bankruptcy, it is inching its way there. This should enable Schweitzer-Mauduit’s management to reassess their ability to pay off their debt.ConclusionThe capital structure analysis is considered one of the most crucial elements inevaluation a firm’s financial leverage and stability. Overall, they measure a firm’s capability offinancing their assets and liabilities. When looking at the debt-to-equity ratio, it shows thatSchweitzer-Mauduit is underperforming, being far below their competitors, showing a highcapital risk. The firm had a major decline in their times interest earn starting in year 2004, and137