FINANCIAL & TAX CALCULATORS
Altman Z Score Calculator
Predict the probability of a company going bankrupt within two years using the Altman Z Score.
What is the Altman Z Score Calculator & How does it work?
The Altman Z Score is a statistical tool used to predict the likelihood that a company will go bankrupt within two years. It was developed by Edward I. Altman in 1968 and is widely used in financial analysis.
The score is calculated using five financial ratios, each weighted according to its importance in predicting bankruptcy. A Z Score above 3 indicates a low risk of bankruptcy, while a score below 1.8 suggests a high risk.
The score is calculated using five financial ratios, each weighted according to its importance in predicting bankruptcy. A Z Score above 3 indicates a low risk of bankruptcy, while a score below 1.8 suggests a high risk.
Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
A = Working Capital / Total Assets
B = Retained Earnings / Total Assets
C = EBIT / Total Assets
D = Market Value of Equity / Book Value of Total Liabilities
E = Sales / Total Assets
B = Retained Earnings / Total Assets
C = EBIT / Total Assets
D = Market Value of Equity / Book Value of Total Liabilities
E = Sales / Total Assets
Parameters
Result—
Frequently Asked Questions
What is the Altman Z Score?
The Altman Z Score is a financial metric used to predict the likelihood of a company going bankrupt within two years.
How do I interpret the Altman Z Score results?
A score above 3 indicates low bankruptcy risk, while a score below 1.8 suggests high risk.
What financial ratios are used in the Altman Z Score calculation?
The calculation uses Working Capital/Total Assets (A), Retained Earnings/Total Assets (B), EBIT/Total Assets (C), Total Liabilities/Total Assets (D), and Sales/Total Assets (E).
Can the Altman Z Score be used for any company?
The Altman Z Score is primarily designed for manufacturing companies. It may not be as accurate for other industries.
How often should I calculate the Altman Z Score?
It’s recommended to calculate it quarterly or annually to monitor changes in a company’s financial health.
What are the limitations of using the Altman Z Score?
The score is most effective for publicly traded companies and may not be accurate for small businesses or startups.
Where can I find more information about the Altman Z Score?
You can learn more from financial analysis textbooks or online resources dedicated to bankruptcy prediction models.
Results are for informational purposes only and do not constitute professional advice.