Altman Z-Score


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Altman Z-Score

A method for determining the likelihood of a company's bankruptcy in the coming two years. A company's Z-score is determined by the application of four or five ratios as variables, each weighted for importance according to a certain formula. The original ratios are working capital / total assets, retained earnings / total assets, EBIT / total assets, market value of equity / book value of liabilities, and sales / total assets. Different versions of the Altman Z-score may use slightly different variables and may weight them differently. A higher score is a positive sign, with a score over 2.99 meaning the company is "safe." The Z-score has predicted corporate bankruptcies with more than 70% accuracy.
References in periodicals archive ?
One of the more interesting aspects of the Populous platform is that it's able to analyze the credit risk of invoices using the Altman Z-score formula and real-time XBRL data.
An Altman Z-score analysis said that the shipping industry dwells on the 'distress' zone predicting bankruptcy.
49*Total Assets) 1,518,115,100 Table 6 Altman Z-Score Microsoft 30-Jun-13 30-Jun-12 30-Jun-11 TOTAL ASSETS 142,431,000 121,271,000 108,704,000 TOTAL LIABILITIES 63,487,000 54,908,000 51,621,000 SALES 77,849,000 73,723,000 69,943,000 EBIT 27,052,000 22,267,000 28,071,000 NET WORKING CAPITAL (NWC) 64,049,000 52,396,000 46,144,000 RETAINED EARNINGS (RE) 9,895,000 -856,000 -6,332,000 SHREHOLDERS EQUITY (SE) 78,944,000 66,363,000 57,083,000 NWC/TOTAL ASSETS 0.
This study uses Altman Z-Score, Beneish model, as well as M-Score on set of data on small Malaysian firms to identify the presence of financial manipulations in their annual reports.
The dependent variable used to test the risk reduction hypothesis is the change in the Altman Z-score based on financial statement information from the fiscal years prior and subsequent to the IPO.
But that's exactly what the Altman Z-Score, developed by renowned New York University Professor Ed Altman, did for the better part of four decades since its creation.
37 companies (see Table 2), whose assumed value of Altman Z-Score was very high, were classified as the most successful ones.
moves towards acceptance of the International Financial Reporting Standard) will affect various financial ratios of the company, most notably the Altman Z-score.
The non-corrective action firms also have a lower Altman Z-Score than the computer industry, which indicates a higher risk of bankruptcy for these firms.
The most common financial stress prediction models used for business enterprises are the Altman Z-score, Ohlson O-score, and Zmijewski probability model.
The best known of these models is the Altman Z-score.