$

$

$

$

$

$

$

Advertisement

The Altman z-score formula used to predict the probability that a firm will go into bankruptcy within two years.

Formula:

Z = 1.2 x X

_{1}+ 1.4 x X_{2}+ 3.3 x X_{3}+ 0.6 x X_{4}+ 1.0 x X_{5}where:

X_{1}=

=Working Capital Total Assets (Current Assets - Current Liabilities) Total Assets X_{2}=Retained Earnings Total Assets X_{3}=Earnings before Interest and Taxes (EBIT) Total Assets X_{4}=

=Market Value Equity Total Liabilities [Market Value Per Share x Outstanding Shares (Diluted)] ÷ 1000 Total Liabilities X_{5}=

Net Sales Total Assets Conclusion:

Z < 1.81 = Distress zone

Z > 2.99 = Safe zone

1.81 < Z < 2.99 = Grey zone

Financial Calculators

Amortization ScheduleDebt Snowball CalculatorEMI CalculatorLoan AffordabilityLoan CalculatorMortgage Loan CalculatorPayoff CalculatorInvestment calculators

Altman Z-Score CalculatorAnnualized Returns CalculatorAPY CalculatorBuying on Margin CalculatorCAGR CalculatorCompound InterestCost of Debt CalculatorCost of Equity CalculatorDCA CalculatorNet Profit Margin CalculatorNPV CalculatorROI CalculatorShort Selling CalculatorWACC CalculatorWeight of Debt and EquityAdvertisement