The Altman Z-Score combines five financial ratios into a single measure of bankruptcy risk. Choose the model for a public manufacturer, a private company or a service business to see the score, its zone and what drives it.
How it works
Calculate the Altman Z-Score from five balance sheet and income statement ratios, using the original model for public manufacturers or the Z′ and Z″ variants for private and non-manufacturing companies.
Z = 1.2X₁ + 1.4X₂ + 3.3X₃ + 0.6X₄ + 1.0X₅ (X₄ uses market value of equity)
Z′ = 0.717X₁ + 0.847X₂ + 3.107X₃ + 0.420X₄ + 0.998X₅ (X₄ uses book equity)
Z″ = 6.56X₁ + 3.26X₂ + 6.72X₃ + 1.05X₄ (no sales term)
Zones — Z: <1.81 distress, 1.81–2.99 grey, >2.99 safe; Z′: 1.23 / 2.90; Z″: 1.10 / 2.60Common uses
- Credit analysis and counterparty risk screening
- Monitoring customers, suppliers and portfolio companies
- Going-concern assessments and financial distress analysis
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Model | Z — public manufacturing company |
| Working capital | $7,050,000 |
| Retained earnings | $12,400,000 |
| EBIT | $5,820,000 |
| Market value of equity | $38,000,000 |
| Sales | $48,500,000 |
| Total assets | $52,400,000 |
| Total liabilities | $30,700,000 |
| Z-Score | 2.53 |
| Zone | Grey zone |
| Distress threshold | < 1.81 |
| Safe threshold | > 2.99 |
The grey zone is inconclusive; examine liquidity, leverage and cash flow trends more closely. The Z-Score is a screening tool, not a credit rating; it was developed on specific historical samples.
Interpreting the results
- Use the original Z only for publicly traded manufacturers; apply Z′ to private firms and Z″ to service, non-manufacturing and emerging-market companies.
- Trend the score over several periods; a steady decline is more informative than one value.
- Asset-light and financial companies fall outside the models’ design and should not be scored with them.
Frequently asked questions
What is a good Altman Z-Score?
For the original model, a score above 2.99 falls in the safe zone, 1.81 to 2.99 is the grey zone, and below 1.81 is the distress zone. The Z′ and Z″ models use different thresholds, which this calculator applies automatically.
Which Z-Score model should I use?
Use the original Z for publicly traded manufacturers, Z′ for private manufacturing companies because it uses book equity, and Z″ for non-manufacturing, service and emerging-market companies because it drops the sales-to-assets ratio.
How accurate is the Altman Z-Score?
The original model correctly classified most bankrupt and non-bankrupt firms in Altman’s samples, particularly within one to two years of failure. It remains a useful screening tool, but it should be combined with cash-flow analysis and industry context.
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