What Is Altmans Z-Score?
Altman’s Z-score was published in 1968 by Edward I. Altman. It is used to predict the probability that a firm will go into bankruptcy within two years. The Z-score looks at EBIT (earnings before interest and taxes) / total assets, net sales / total Assets, market value of equity / total liabilities, working capital / total assets, and retained earnings / total assets. All of these ratios can be computed with line items from the income or balance sheet. Where to Find the Data Look up earnings before interest and taxes (EBIT) on the income statement along with net sales. Total assets, market value of equity, total liabilities, current assets, retained earnings and current liabilities can be found on the balance sheet. Each of these line items represents the amount of debt the company currently has, and the ability of the company to pay that debt off with assets or sales. Do the Calculation Use a calculator to compute the formula. While the calculation is straightforward, there are also w
