Altman Z-Score Calculator

How it is calculated

You enter seven amounts, all in the same currency and unit. The tool turns them into five ratios and weights them:

Z = 1.2·(WC/TA) + 1.4·(RE/TA) + 3.3·(EBIT/TA) + 0.6·(MVE/TL) + 1.0·(Sales/TA)

WC is working capital, RE retained earnings, EBIT earnings before interest and tax, MVE the market value of equity, TL total liabilities, and TA total assets. Total assets and total liabilities must be above 0, but the other five may be zero or negative. The zone uses the original cut-offs: above 2.99 is Safe, 1.81 to 2.99 is Grey, and below 1.81 is Distress. These weights are those of the original model for public manufacturers; the versions Altman later made for private firms or non-manufacturers use different weights and cut-offs and are not applied here.

Common mistakes

• Using book equity instead of the market value of equity in the fourth ratio. The model needs the market capitalisation, so a company with no listed shares falls outside the model.
• Mixing units, for example sales in millions and total assets in thousands. All seven amounts must share one unit, otherwise every ratio is wrong.
• Entering total liabilities where total assets belong, or the reverse. Total assets divide four of the five terms; total liabilities divide only the equity term.
• Applying the score to a bank, a service company or a private firm and trusting the zone. The cut-offs belong to the original manufacturer model, so such results are only a rough indication.
• Entering EBIT as net income or leaving out a negative sign for losses and negative retained earnings. Those signs strongly lower the score, and dropping them hides the risk.