Altman Z-Score for Bankruptcy Prediction

Altman Z-Score Bankruptcy Prediction

(Model for Private Companies)

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Working Capital (WC) Current Assets - Current Liabilities

Total Assets (TA) Sum of all company assets

Retained Earnings (RE) Cumulative profits reinvested

EBIT (Earnings Before Interest & Taxes) Operating income

Book Value of Equity (BVE) Total Assets - Total Liabilities

Total Liabilities (TL) Sum of all company debts

Sales / Revenue Total income from sales

Results

Altman Z-Score:

Interpretation:

Component Ratios:

A (WC/TA): N/A

B (RE/TA): N/A

C (EBIT/TA): N/A

D (BVE/TL): N/A

E (Sales/TA): N/A

Z-Score Interpretation Guide (Private Companies)

• Z-Score > 2.6: "Safe" Zone. Low probability of financial distress.
• 1.1 < Z-Score ≤ 2.6: "Grey" Zone. Caution advised, potential for financial distress. Further analysis recommended.
• Z-Score ≤ 1.1: "Distress" Zone. High probability of financial distress or bankruptcy.

Disclaimer: The Altman Z-Score is a historical model and should be used as one of many tools for financial analysis, not as a sole predictor of bankruptcy.