The Altman Z-Score gauges a manufacturing company’s probability of bankruptcy.
A = Working Capital / Total Assets
B = Retained Earnings / Total Assets
C = EBIT / Total Assets
D = Market Value of Equity / Total Liabilities
E = Sales / Total Assets
Altman Z-Score = (1.2 x A) + (1.4 x B) + (3.3 x C) + (0.6 x D) + E
- Wikipedia – Altman Z-Score – An explanation of the Altman Z-Score and how it is calculated.
- Accounting Tools – The Altman Z-Score Formula – A quick example of the formula for the Altman Z-Score.
- Investopedia – Altman Z-Score – Another explanation of the Altman Z-Score and how it is calculated.
- Old School Value – Altman Z Score Useless? Here’s Why I’m Still Using It – A discussion on how Altman Z-Score can be used.
- Business Insider – The Altman Z-Score: Is it possible to predict corporate bankruptcy using a formula? – Some history on the Altman Z-Score and how it was created.