Financial Poise

Altman Z Score

  • July 3, 2022
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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.