Use our free Altman Z-Score Calculator to quickly evaluate a company's financial stability and predict its likelihood of bankruptcy. This powerful tool, developed by Edward I. Altman, helps investors and creditors make informed decisions by assessing financial distress through key ratios. Understand your investments better today.
Formula:
The Altman Z-Score is a multivariate formula used to predict the probability that a firm will go into bankruptcy within two years. There are different versions for public and private companies.
For Publicly Traded Manufacturing Firms:
Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
- A = Working Capital / Total Assets
- B = Retained Earnings / Total Assets
- C = Earnings Before Interest & Taxes (EBIT) / Total Assets
- D = Market Value of Equity / Total Liabilities
- E = Sales / Total Assets
For Private Companies:
Z' = 0.717A + 0.847B + 3.107C + 0.420D + 0.998E
- A = Working Capital / Total Assets
- B = Retained Earnings / Total Assets
- C = Earnings Before Interest & Taxes (EBIT) / Total Assets
- D = Book Value of Equity / Total Liabilities
- E = Sales / Total Assets
Interpretation: Higher Z-Scores generally indicate lower bankruptcy risk.