Altman Z Score Calculator
Calculate a model specific Altman score from company accounting figures and compare it with published reference bands.
How the models work
Enter accounting figures from a consistent reporting period. Working capital is current assets minus current liabilities. Total assets and total liabilities must be positive. Working capital, retained earnings, and EBIT may be negative. Enter market equity only for the public manufacturing model. Enter book equity for the private manufacturing and nonmanufacturing models.
The public manufacturing model uses 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5, with X4 equal to market equity divided by total liabilities. The private manufacturing model uses 0.717X1 + 0.847X2 + 3.107X3 + 0.420X4 + 0.998X5, with book equity in X4. The nonmanufacturing Z double prime model uses 6.56X1 + 3.26X2 + 6.72X3 + 1.05X4, where X4 uses book equity and there is no sales term or intercept.
For all models, X1 is working capital divided by total assets, X2 is retained earnings divided by total assets, and X3 is EBIT divided by total assets. X5 is sales divided by total assets in the public and private models. The table shows each ratio and its weighted contribution. A zero denominator makes the score unavailable rather than zero.
Choose the model that matches the company type and the source of equity value. Total liabilities means book value of current and long term liabilities together. Use the same reporting period, currency, and amount units for every input. This tool does not map filings automatically.
Step by step
- Choose the public manufacturing, private manufacturing, or nonmanufacturing model.
- Enter the required accounting values from one reporting period.
- Review the score, model band, ratios, and weighted contributions.
Worked example
For a public manufacturing example, enter working capital of 50,000 USD, retained earnings of 20,000 USD, EBIT of 30,000 USD, market value of equity of 100,000 USD, total liabilities of 60,000 USD, total assets of 150,000 USD, and sales of 200,000 USD.
The ratios are X1 0.3333, X2 0.1333, X3 0.2000, X4 1.6667, and X5 1.3333. The weighted contributions sum to a Z score of 3.58, which is above the public model reference band. It is a model result, not a bankruptcy probability or an assessment of this company’s safety.
When to use this calculator
Use it to calculate a model specific ratio score from manually entered historical company figures and inspect the contribution of each ratio.
Pair the score with statement review and other analysis. It cannot replace cash flow analysis, industry knowledge, or a company specific credit assessment.
Input checks
Use total assets and total liabilities above zero. Enter each accounting amount in the same currency and units, and align the reporting period. Do not substitute market equity into a model that calls for book equity.
A missing or unavailable score is not a zero score or a distress classification. Check that the chosen model has its required equity value and sales inputs, and review the source statements before interpreting the ratios.
Formulas
X1 = working capital / total assets
X2 = retained earnings / total assets
X3 = EBIT / total assets
X4 = equity value / total liabilities
X5 = sales / total assets
Public manufacturing: Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5
Private manufacturing: Z′ = 0.717X1 + 0.847X2 + 3.107X3 + 0.420X4 + 0.998X5
Nonmanufacturing: Z″ = 6.56X1 + 3.26X2 + 6.72X3 + 1.05X4
Public model X4 uses market equity. Private and nonmanufacturing model X4 use book equity. The nonmanufacturing Z double prime version omits X5 and has no intercept. Reference bands depend on the selected model and are descriptive ranges, not predictions.
Limitations and assumptions
This calculator applies published coefficients to user supplied figures. It does not verify filings, map accounting standards, adjust special items, or account for off balance sheet obligations. Reference bands are model specific historical ranges, not guaranteed outcomes or company specific probabilities. The model may not fit financial firms or companies with unusual statements. Consistent period, currency, and unit choices are necessary for meaningful comparisons.
Key terms
- Working capital
- Current assets minus current liabilities for the reporting date or period used in the analysis.
- Market value of equity
- Market capitalization for the public model, measured on a stated date and expressed in the same currency and units as other inputs.
- Book value of equity
- The accounting equity amount used in the private manufacturing and nonmanufacturing model versions.
Related analysis
Use this score as one descriptive view of historical accounting data. A ratio tool or valuation model can add context, but none verifies a company’s statements or predicts its future condition.
Keep the selected Altman model and its reference bands visible when comparing results. A score from one model is not directly interchangeable with a score from another model.
FAQ
What does the Altman Z score show?
It combines selected financial ratios into one score under a chosen Altman model. The score can be compared with that model’s published reference bands. It does not give a company specific probability of bankruptcy or guarantee an outcome.
How do the three model choices differ?
The public manufacturing version uses market equity and five ratios. The private manufacturing version substitutes book equity and uses revised coefficients. The nonmanufacturing Z double prime version uses book equity, omits sales to assets, and has four weighted ratios with no intercept.
Why does the score become unavailable when liabilities are zero?
Each model divides its equity value input by total liabilities. A zero denominator makes X4 undefined. Negative total liabilities are outside this calculator’s supported financial domain, so no score is returned.
What do the reference bands mean?
They are model specific ranges published with the selected formulation. The lower, middle, and upper labels describe where the calculated number falls relative to those ranges. They are not safety labels, bankruptcy probabilities, or universal cutoffs for every company.
Can I compare scores from different model versions?
Do not treat them as directly equivalent. The models use different coefficients, inputs, and reference bands. Select the version that matches the company type and retain that model when comparing periods.
Related tools
Use other financial analysis tools to examine cash flow, valuation, or historical price changes separately. Those calculations do not validate the accounting data entered here.