Altman z-score

Altman z-score,

Definition of Altman z-score:

  1. One can calculate the Altman Z-score as follows:.

  2. Created by New York University Professor Edward Altman, this method is a valid indictor of bankruptcy. This measures your ability to pay or expect solvency.

  3. The Altman Z-score is the output of a credit-strength test that gauges a publicly-traded manufacturing company's likelihood of bankruptcy. The Altman Z-score is based on five financial ratios that can calculate from data found on a company's annual 10-K report. It uses profitability, leverage, liquidity, solvency, and activity to predict whether a company has a high probability of becoming insolvent.

How to use Altman z-score in a sentence?

  1. The Altman Z-score is a formula for determining whether a company, notably in the manufacturing space, is headed for bankruptcy. .
  2. An Altman Z-score close to 1.8 suggests a company might be headed for bankruptcy, while a score closer to 3 suggests a company is in solid financial positioning.
  3. The formula takes into account profitability, leverage, liquidity, solvency, and activity ratios. .

Meaning of Altman z-score & Altman z-score Definition