Z-Score

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Use the Z-Score table above to enter financials of the company you would like information about.  The table will refresh itself when data is entered.   To repeat with another company, click the ‘Refresh’ button to clear the data.

Altman’s Z-Score (Edward Altman) determines how likely a company is to fail.  In general, the lower the score, the higher the chance of bankruptcy. For example, a Z-Score above 3.0 indicates financial soundness; below 1.8 suggests a high likelihood of bankruptcy.  In general, the lower the score, the higher the chance of bankruptcy.  The Altman Z-Score has a 72% success rate of predicting bankruptcy within 2 years.

The Standard Z-Score

Z-Score = ([Working Capital / Total Assets] x 1.2) + ([Retained Earnings / Total Assets] x 1.4) + ([Operating Earnings / Total Assets] x 3.3) + ([Market Capitalization / Total Liabilities] x 0.6) + ([Sales/ Total Assets] x 0.999)

Z-Score for Private Companies

A revised Z-Score formula for private companies was developed in 2002. The private company version weights the variables differently and uses book value of equity in place of market capitalization.

Z-Score = ([Working Capital / Total Assets] x 0.717) + ([Retained Earnings / Total Assets] x 0.847) + ([Operating Earnings / Total Assets] x 3.107) + ([Book Value of Equity / Total Liabilities] x 0.420) + ([Sales / Total Assets] x 0.998)

Z-Score for Non-Manufacturers

The Non-Manufacturers Z-score excludes the last component (sales / total assets) because Altman wanted to minimize the effects of manufacturing-intensive asset turnover.

Z-Score = ([Working Capital / Total Assets] x 1.2) + ([Retained Earnings / Total Assets] x 1.4) + ([Operating Earnings / Total Assets] x 3.3) + ([Market Capitalization / Total Liabilities] x 0.6)

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