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Altman Z-Score Calculator Formula Breakdown
Measures short-term balance sheet liquidity cushion.
Measures cumulative profitability and corporate age/reinvestment.
Measures productive operating earnings power of company assets.
Measures solvency: how much the market value can decline before liabilities exceed assets.
Measures asset turnover and management's capability in generating revenue from assets.
How to Calculate Altman Z-Score Step-by-Step
Extract Working Capital, Total Assets, Retained Earnings, Operating Income (EBIT), Market Cap, Total Liabilities, and Revenue.
Compute all five financial ratios (X1 through X5).
Multiply each ratio by its empirical discriminant weight and sum the weighted components.
Classify the resulting Z-Score into Safe Zone (>2.99), Grey Zone (1.81 - 2.99), or Distress Zone (<1.81).
How to Interpret the Result
Frequently Asked Questions
What is the Altman Z-Score?
Invented by NYU Professor Edward Altman in 1968, the Z-Score is a formula that predicts whether a manufacturing or public company will enter bankruptcy within two years with over 80% accuracy.
What are the Altman Z-Score zones?
Safe Zone: Z > 2.99 (Low bankruptcy risk). Grey Zone: 1.81 ≤ Z ≤ 2.99 (Moderate risk, caution warranted). Distress Zone: Z < 1.81 (High risk of insolvency).
Does the Altman Z-Score work on banks?
Standard Altman Z is not suited for commercial banks or financial firms because customer deposits count as balance sheet liabilities, skewing ratio X4. Our tool automatically detects banks and flags them appropriately.
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