Altman Z-Score Calculator
Calculate the Altman Z-Score to assess bankruptcy risk from five financial ratios, with variants for public manufacturers, private firms, and non-manufacturers.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Altman Z-Score Calculator | — | Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E (public manufacturing) | score |
Step-by-Step Examples
WC 620,000, RE 1,450,000, EBIT 890,000, assets 6,200,000, equity 4,800,000, liabilities 2,900,000, revenue 7,400,000.
- A = 0.100, B = 0.234, C = 0.144
- D = 4,800,000 / 2,900,000 = 1.655, E = 1.194
- Z = 1.2(0.100) + 1.4(0.234) + 3.3(0.144) + 0.6(1.655) + 1.0(1.194)
- Z = 0.120 + 0.327 + 0.474 + 0.993 + 1.194 = 3.11
WC 150,000, RE 200,000, EBIT 260,000, assets 4,000,000, equity 1,600,000, liabilities 2,400,000, revenue 3,800,000.
- A = 0.038, B = 0.050, C = 0.065, D = 0.667, E = 0.950
- Z = 0.045 + 0.070 + 0.215 + 0.400 + 0.950 = 1.68
Same figures using book equity and the Z′ coefficients.
- Z′ uses different coefficients and thresholds
- Safe above 2.9, distress below 1.23
- The private variant substitutes book equity for market value
Real-World Applications
Common Mistakes to Avoid
The original Z applies to public manufacturers. Private firms and non-manufacturers need Z′ and Z″, which have different coefficients and thresholds entirely.
It is a statistical model built on historical data from specific eras and sectors. It flags elevated risk; it does not forecast failure.
Banks and insurers have balance sheet structures the model was never designed for, and the ratios carry different meaning there.