ALTMAN Z-SCORE

The Altman Z-Score is a method of finantial analysis business. It dish up to detect the probably of the crash company. This model was created in 1960 by Edward Atlman, University of New york teacher’s.

 

 

Model Variables:

X1= (Current asset-current liabilities) / Total assets, that is to say, the relation between working capital and the total assets.
X2= Stockpile/ Total assets, which search to link up the results non share out with the total assets.
X3= Gain before interest and taxation/ Total assets, that is tos ay, BAII/AT or economic company profitability.
X4= Own means/ Total assets one of the ratios more representative of the Indebtedness level. X5= Net sales/ Total assets, by the one wich measure the asset turnover.

Altman Z-Score
is measure on the next way: 1,2*X1+1,4*X2+3,3*X3+0,6*X4+1,0*X5

Interpretation of the model:

Z-SCORE> 3: «SAFE ZONE». The company is safe It doesnt shows probability of bankruptcy.
2,7< Z-SCORE< 2,9: “CAUTION ZONE” It must do an analysis before to entry on the company.
1,8< Z-SCORE< 2,7: “GREY ZONE”. If the finantial conditions doesn’t change quickly, It’s probably that the company bankruptcy in the next two years.
Z-SCORE< 1,8: Backruptcy state