Altman Z-Score

What does it Mean? A predictive model created by Edward Altman in the 1960s. This model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies.
 
Investopedia Says... Generally speaking, the lower the score, the higher the odds of bankruptcy. Companies with Z-Scores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. Scores in between 1.8 and 3 lie in a grey area.

This is a relatively accurate model -- real world application of the Z-Score successfully predicted 72% of corporate bankruptcies two years prior to these companies filing for Chapter 7.

Terms Related Links

Bankruptcy
Bankruptcy Risk
Chapter 11
Chapter 7

Terms Related Links
Z Marks The End - Investors need to know how to detect signs of looming bankruptcy. The Z-score can help.

An Overview Of Corporate Bankruptcy - As soon as you invest in a company, you face this risk. Find out what it means.




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