Altman Z-Score Calculator
This calculator helps you determine your company's risk of insolvency using the Altman Z-Score model. It's particularly useful for financial analysts and corporate finance professionals to assess the financial health of a business.
Calculator
Results
Data Source and Methodology
All calculations are based on the Altman Z-Score model, a financial formula developed by Edward Altman in 1968. For a detailed methodology, refer to the original paper: Altman Z-Score Insolvency Predictor. All calculations adhere strictly to the formulas and data provided by this source.
The Formula Explained
The Altman Z-Score is calculated using the following formula:
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)
Glossary of Terms
- Working Capital: Current assets minus current liabilities.
- Retained Earnings: The accumulated portion of net income that is retained by the company rather than distributed as dividends.
- EBIT: Earnings Before Interest and Taxes.
- Market Value of Equity: Total market value of a company's outstanding shares.
- Sales: Total revenue from goods sold or services provided.
How It Works: A Step-by-Step Example
Let's assume a company has the following financials:
- Working Capital: $500,000
- Retained Earnings: $1,000,000
- EBIT: $750,000
- Market Value of Equity: $2,000,000
- Sales: $1,500,000
- Total Assets: $4,000,000
- Total Liabilities: $1,500,000
Using the Altman Z-Score formula, the Z-Score is calculated as follows:
Z = 1.2 * (500,000 / 4,000,000) + 1.4 * (1,000,000 / 4,000,000) + 3.3 * (750,000 / 4,000,000) + 0.6 * (2,000,000 / 1,500,000) + 1.0 * (1,500,000 / 4,000,000)
The resulting Z-Score would provide an indication of the company's financial health.
Frequently Asked Questions (FAQ)
What is the Altman Z-Score?
The Altman Z-Score is a formula used to predict the probability of a company going bankrupt within two years.
How accurate is the Altman Z-Score?
The Z-Score is a useful tool, but it should be used in conjunction with other financial assessment tools.
What is considered a good Z-Score?
A Z-Score above 3.0 is generally considered good, indicating a low probability of bankruptcy.
Can the Z-Score be used for all companies?
The original formula is best suited for manufacturing companies. Other versions of the model exist for private and non-manufacturing firms.
How often should I calculate my company's Z-Score?
Regularly, especially after significant financial events or at the end of every fiscal period.
Formula (LaTeX) + variables + units
','
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)
Z = 1.2 * (500,000 / 4,000,000) + 1.4 * (1,000,000 / 4,000,000) + 3.3 * (750,000 / 4,000,000) + 0.6 * (2,000,000 / 1,500,000) + 1.0 * (1,500,000 / 4,000,000)
- T = property tax (annual or monthly depending on input) (currency)
- Altman Z-Score Insolvency Predictor — creditguru.com · Accessed 2026-01-19
https://www.creditguru.com/index.php/bankruptcy-and-insolvency/altman-z-score-insolvency-predictor
Last code update: 2026-01-19
- Initial audit spec draft generated from HTML extraction (review required).
- Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
- Confirm sources are authoritative and relevant to the calculator methodology.