Altman Z-Score Calculator
Predict bankruptcy risk using the 5-ratio Altman Z-Score model.
How It Works
Enter seven financial metrics from a company's balance sheet and income statement: Working Capital, Total Assets, Retained Earnings, EBIT (Earnings Before Interest and Taxes), Market Value of Equity, Book Value of Total Liabilities, and Total Sales. Select the appropriate model based on company type — public manufacturing (original 1968 formula), private company (adjusted coefficients), or non-manufacturing (service firms).
The calculator computes five financial ratios and applies Altman's weighted coefficients to produce a Z-Score. Each ratio's contribution to the final score is displayed in the breakdown table. The score is classified into three zones: Safe Zone (Z > 3.0, low bankruptcy risk), Grey Zone (1.8 ≤ Z ≤ 3.0, moderate caution), and Distress Zone (Z < 1.8, high bankruptcy probability within two years).
FAQ
What is the Altman Z-Score?
The Altman Z-Score is a formula that predicts the probability of a company going bankrupt within two years. It combines five financial ratios — liquidity, profitability, leverage, solvency, and activity — into a single score. A score below 1.8 signals high bankruptcy risk, while above 3.0 indicates financial health.
What is the difference between the three models?
The original 1968 formula was designed for public manufacturing companies. For private companies, Altman replaced market value of equity with book value of equity and adjusted the coefficients. The non-manufacturing model (1993) drops the Sales/Total Assets ratio and uses different weights suitable for service and non-industrial firms.
What do the five ratios measure?
Working Capital / Total Assets (liquidity), Retained Earnings / Total Assets (cumulative profitability), EBIT / Total Assets (operating efficiency), Market Value of Equity / Total Liabilities (solvency/market sentiment), and Sales / Total Assets (asset turnover). Each ratio captures a different dimension of financial health.
Does the Z-Score work for all types of companies?
The Z-Score works best for manufacturing and industrial firms. It is less reliable for financial companies (banks, insurance), startups with no earnings history, and service companies with few tangible assets. Use the non-manufacturing model for service firms.
How far into the future can the Z-Score predict?
The score is most accurate for a 1-2 year horizon. Altman's original study showed 72% accuracy in predicting bankruptcy one year ahead, dropping to about 48% at two years. It should be used as one indicator among many — not a standalone decision tool.
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