Altman Z-Score Calculator

What is the Altman Z-Score?

The Altman Z-Score is a financial model developed by Professor Edward Altman to estimate a company's probability of bankruptcy using a combination of profitability, leverage, liquidity, solvency, and activity ratios. It is widely used by analysts, lenders, and investors to screen for financial distress.

How the Altman Z-Score is Calculated

This calculator uses the original five-factor Altman Z-Score formula for publicly traded manufacturing firms:

Z = 1.2 × (Working Capital / Total Assets)
  + 1.4 × (Retained Earnings / Total Assets)
  + 3.3 × (EBIT / Total Assets)
  + 0.6 × (Market Value of Equity / Total Liabilities)
  + 1.0 × (Sales / Total Assets)

Interpretation of the Z-Score:

• Z < 1.81: Distress zone (high bankruptcy risk)
• 1.81 ≤ Z ≤ 2.99: Grey zone (moderate risk)
• Z > 2.99: Safe zone (lower observed risk of bankruptcy)

Limitations & Notes

• The original model was calibrated for U.S. manufacturing companies; results may differ for other sectors or private firms.
• The Z-Score is based on historical accounting data and may not capture sudden changes in business conditions.
• Use the Altman Z-Score as one input among many in a comprehensive credit and risk analysis.