Altman Z-Score Calculator (Bankruptcy Risk)
Altman's Z-score for a listed manufacturing company from five balance-sheet and income figures, with the safe, grey or distress zone and the five ratios behind it.
Results
The dashed line marks the value you entered.
What this tool does
Edward Altman published the Z-score in 1968 as a way to combine five ratios into one number that separates firms that later failed from firms that did not. The weights are not arbitrary: profitability (EBIT ÷ assets) carries by far the biggest one, 3.3. Above 2.99 the original model calls a company safe, below 1.81 it flags distress, and in between lies a wide grey zone where it says little. It was fitted on listed manufacturers, so for banks, services or private firms other versions exist and this one should be read only as a rough warning light.
Formula
Z = 1.2 X₁ + 1.4 X₂ + 3.3 X₃ + 0.6 X₄ + 1.0 X₅ (X₁ = working capital ÷ assets, X₂ = retained earnings ÷ assets, X₃ = EBIT ÷ assets, X₄ = market equity ÷ liabilities, X₅ = sales ÷ assets)
Variables
| Symbol | Meaning | Unit |
|---|---|---|
wc | Working capital (current assets − current liabilities) | — |
re | Retained earnings | — |
eb | Operating profit (EBIT) | — |
me | Market value of equity (market capitalisation) | — |
sa | Sales (revenue) | — |
ta | Total assets | — |
tl | Total liabilities | — |
Z | Altman Z-score | — |
ST | Zone | — |
X1 | X₁ Working capital ÷ assets | — |
X2 | X₂ Retained earnings ÷ assets | — |
X3 | X₃ EBIT ÷ assets | — |
X4 | X₄ Market equity ÷ liabilities | — |
X5 | X₅ Sales ÷ assets | — |
Worked example
- Working capital (current assets − current liabilities)200
- Retained earnings300
- Operating profit (EBIT)120
- Market value of equity (market capitalisation)800
- Sales (revenue)1100
- Total assets1000
- Total liabilities400
- Altman Z-score3.36
- ZoneSafe zone (above 2.99)
- X₁ Working capital ÷ assets0.200
- X₂ Retained earnings ÷ assets0.300
- X₃ EBIT ÷ assets0.120
- X₄ Market equity ÷ liabilities2.000
- X₅ Sales ÷ assets1.100
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The default values are typical reference figures, not measurements of your situation. Replace them with your own data whenever you have it.