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Z-Score Analysis Calculation-Small Business

 

Z-Score If Public OR Private Small Business
NOTE: Dr. Altman occasionally updates his Z-Score formulae.
We suggest checking his site routinely: Click Here

 
 

Check your Z-Score: How's your Fiscal Fitness?

This worksheet figures out the Z-Score for your company, which indicates financial health.

From Your Financial Statement You'll put in:

  • Earnings before taxes
  • Total assets
  • 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: The (Sales/Total Assets) ratio is believed to vary significantly by industry. It is likely to be higher for merchandising and service firms than for manufacturers, since the former are typically less capital intensive. Consequently, non-manufacturers would have significantly higher asset turnover and Z scores. The model is thus likely to under predict certain sorts of bankruptcy. To correct for this potential defect, Altman recommends that the (Sales/Total Assets) ratio be eliminated with corresponding changes in the remaining ratios.

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.

We have preloaded some numbers for you. Click on Calculate Z-score to see the results. Then come back here and enter your numbers.

RATIO FORMULA WEIGHT FACTOR WEIGHTED RATIO
 
Return on Total Assets Earnings Before Interest and Taxes

Total Assets

x 6.72 ---
 
Equity to Debt Market Value of Equity

Total Liabilities

x 1.05 ---
 
Working Capital to Total Assets Working Capital

Total Assets

x 6.56 ---
Retained Earnings to Total Assets Retained Earnings

Total Assets

x 3.26 ---

 

KEY:

Z-SCORE ABOVE 2.90--YOU'RE IN GOOD SHAPE

Z-SCORE BETWEEN 2.90 and 1.23--WARNING SIGNS

Z-SCORE BELOW 1.23--BIG TROUBLE--COULD BE HEADING TOWARD BANKRUPTCY

 



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