Altman Z Score Formulas

Altmans Z-Score determines how likely a company is to fail.

The formula does this by evaluating seven simple pieces of data, all of which should be available in the companys public disclosure.

Standard Z-Score (Public)

Z-Score = ([Working Capital / Total Assets] x 1.2) + ([Retained Earnings / Total Assets] x 1.4) + ([Operating Earnings / Total Assets] x 3.3) + ([Market Capitalization / Total Liabilities] x 0.6) + ([Net Sales / Total Assets] x 1.0)

Z-Score for Private Companies

Z-Score = ([Working Capital / Total Assets] x 0.717) + ([Retained Earnings / Total Assets] x 0.847) + ([Operating Earnings / Total Assets] x 3.107) + ([Book Value of Equity / Total Liabilities] x 0.420) + ([Net Sales / Total Assets] x 0.998)

Z-Score for Nonmanufacturers

Z-Score = ([Working Capital / Total Assets] x 1.2) + ([Retained Earnings / Total Assets] x 1.4) + ([Operating Earnings / Total Assets] x 3.3) + ([Market Capitalization / Total Liabilities] x 0.6)