In 1968 Edward Altman developed the Z-Score to assess a business's financial health and to predict the likelihood of financial distress.

The Z-score use 5 popular financial ratios and coefficients to describe the likelihood that a business will experience financial distress within 1 year of the financial results used, and has gained acceptance by auditors, management accountants and courts.

Today this internationally accepted model is used in database systems for loan evaluation. The Z-score has an accuracy of approximately 85% and works best for manufacturing companies, but has limited use in evaluating financial results in property companies.

Privately held manufacturing companies with a Z-score of more than 3 is classified as being in good shape and the likelihood of financial distress within the next year is considered slim. Similarly, a Z-score of below 1.8 indicates that a company is likely to face financial distress within one year or less.

Please note: We are able to benchmark your business against industry norms.

Input source reference: Privately held companies (manufacturing industry)
Green cells are from the Income Statement / Red cells are from the Balance Sheet

EBIT: Earnings before interest and tax
Calculate: Total revenue minus expenses, excluding tax and interest

Total assets
Calculate: Sum of all current and long-term assets

Market value of equity (Private entities)
Calculate: Total assets minus total liabilities (including shareholder loans)

Total liabilities
Calculate: Sum of all current and long-term liabilities

Current assets
Calculate: Sum of all current assets

Current liabilities
Calculate: Sum of all current liabilities

Retained earnings
Calculate: Sum of retained earnings balance