From Your Financial Statement You'll put in:

• Earnings before taxes
• Total assets
• Net Sales
• Market Value of Equity
• Total Liabilities
• Working Capital (Current  Assets minus Current Liabilities)
• Retained Earnings

The worksheet will indicate:

The short-term potential for financial problems at your company.

For more detail explanations and the formula see our two worksheets:
Altman Z-Score Analysis - Background and The Altman Z-Score Analysis

Please Note: Altman's Publicly Held model is probably the classic of this genre. The original data sample consisted of 66 firms, half of which had filed for bankruptcy under Chapter 7. All businesses in the database were manufacturers, and small firms with assets of less than $1 million were eliminated.

Also Note: The z-score represents a point in time. As such, the z-scores should be examined over time. Consistently low scores each year are more of a concern than a one time low score.

The Z score has proven successful in the real world. It correctly predicted 72% of bankruptcies two years prior to the event. Z score profiles for failing businesses often indicate a consistent downward trend as they approach bankruptcy.

KEY:

• Z-SCORE ABOVE 2.99--YOU'RE IN GOOD SHAPE
• Z-SCORE BETWEEN 2.99 and 1.81--WARNING SIGNS
• Z-SCORE BELOW 1.81--BIG TROUBLE--COULD BE HEADING TOWARD BANKRUPTCY