Meaning
Altman Z-score is a model estimating bankruptcy risk from financial ratios.
Formula
Weighted combination of profitability, leverage, liquidity, solvency and activity ratios
Practical reading
Lower values usually mean higher financial stress risk.
Calculation detail
The original public-company formula is Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E, where A is working capital/total assets, B retained earnings/total assets, C EBIT/total assets, D market value of equity/total liabilities and E sales/total assets.
What to check
Treat it as a screening signal rather than a bankruptcy forecast. A falling score deserves a review of debt, refinancing needs and operating cash flow.
Limits and caveats
Different Altman variants were designed for private companies, non-manufacturers and emerging markets; thresholds are not universal.