An “Altman Z Score” is a statistical tool used to assess how likely a company is to go bankrupt in the near future based on five financial ratios.
Typically, a lower Z score value indicates a higher risk of bankruptcy and vice visa. A Z Score of 3.0 or greater indicates that a company should not be expected to become bankrupt in the next 24 months. A Z Score of between 1.8 and 3.0 falls in the grey area where it is difficult to predict whether or not the company will go bankrupt. A Z Score of 1.8 or less suggests a high likelihood of bankruptcy.