Edward Altman published the Z-score in 1968; it correctly predicted most bankruptcies in his sample. Variants exist for private firms (Z′) and non-manufacturers (Z″). It works best as an early-warning signal, not a verdict.
How to use the Altman Z-Score Calculator
- Net working capital
- Retained earnings
- EBIT
- Market value of equity
- Sales
- Total assets
- Total liabilities
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter working capital, retained earnings, EBIT, market value of equity, sales, total assets and total liabilities.
Tips
- Check whether rates are quoted annually, semi-annually or per period.
- Bond prices and yields move in opposite directions – a higher yield means a lower price.
- Use the bond’s clean price (without accrued interest) for yield calculations.
- Credit ratios are most useful when tracked over several years.
Common mistakes to avoid
- Confusing the coupon rate with the yield.
- Using the face value instead of the market price.
- Forgetting that callable bonds may be redeemed before maturity.
Inputs explained
| Field | What to enter |
|---|---|
| Net working capital | Amount in your currency |
| Retained earnings | Amount in your currency |
| EBIT | Amount in your currency |
| Market value of equity | Amount in your currency |
| Sales | Amount in your currency |
| Total assets | Amount in your currency |
| Total liabilities | Amount in your currency |
Example values
How the main result changes when Net working capital changes and everything else stays at the example values above:
| Net working capital | Altman Z-score |
|---|---|
| 100,000,000 | 3.29 |
| 150,000,000 | 3.35 |
| 200,000,000 | 3.41 |
| 250,000,000 | 3.47 |
| 300,000,000 | 3.53 |
| 400,000,000 | 3.65 |
Formula
Z = 1.2 × (working capital ÷ assets) + 1.4 × (retained earnings ÷ assets) + 3.3 × (EBIT ÷ assets) + 0.6 × (market value of equity ÷ liabilities) + 1.0 × (sales ÷ assets)Safe > 2.99; grey 1.81–2.99; distress < 1.81Worked example
Inputs — Net working capital: $200,000,000; Retained earnings: $350,000,000; EBIT: $120,000,000; Market value of equity: $900,000,000; Sales: $1,300,000,000; Total assets: $1,000,000,000; Total liabilities: $550,000,000.
Results — Altman Z-score = 3.41; Zone = Safe zone – low risk.
Frequently asked questions
What is a good Altman Z-score?
Above 2.99 is the safe zone.
Does it work for non-manufacturers?
Use the Z″ model for service and non-manufacturing companies.
How accurate is it?
It predicted about 80–90% of bankruptcies one year out in tests.