Z-Score If
Public OR Private Non-Manufacturing
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.
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.
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
