About the Altman Z-Score Calculator
This Altman Z-score calculator combines five (or four) financial ratios into a single score that predicts the likelihood of corporate bankruptcy, then places the company in the safe, grey or distress zone. Enter figures from the latest balance sheet and income statement — working capital, retained earnings, EBIT, equity, total liabilities, sales and total assets.
Three versions are available. The original 1968 Z-score was built for publicly traded manufacturers and uses the market value of equity. The Z′ model re-estimates the weights for private manufacturers using book equity. The Z″ model drops the sales-to-assets ratio so it can be used for non-manufacturers, service firms and emerging-market companies, where asset intensity varies widely.
Credit analysts, lenders, auditors assessing going concern and investors screening for financial distress use the score as an early warning. It is a statistical screen, not a verdict: it was estimated on specific samples of companies, does not suit banks or insurers, and should be read alongside cash-flow and liquidity analysis.
With the default inputs, the z-score is 3.29. Change any value above to recalculate instantly.
How to use the altman z-score calculator
- 1Choose the model: public manufacturer, private manufacturer or non-manufacturer.
- 2Enter total assets, working capital and retained earnings from the balance sheet.
- 3Enter EBIT and sales from the income statement.
- 4Enter market capitalization (public model) or book equity, plus total liabilities.
- 5Read the Z-score and its risk zone, then check which ratios pull the score down.
Formula and method
Each model is a weighted sum of financial ratios from Altman’s discriminant analysis. X1 is working capital ÷ total assets (liquidity), X2 retained earnings ÷ total assets (accumulated profitability and age), X3 EBIT ÷ total assets (operating productivity of assets), X4 equity ÷ total liabilities (leverage cushion) and X5 sales ÷ total assets (asset turnover).
The original Z uses the market value of equity in X4, with zones of above 2.99 safe, 1.81–2.99 grey and below 1.81 distress. Z′ uses book equity, with cut-offs of 2.9 and 1.23. Z″ omits X5 and uses book equity, with cut-offs of 2.6 and 1.1. Ratios are entered as decimals, not percentages.
- X1
- Working capital ÷ total assets
- X2
- Retained earnings ÷ total assets
- X3
- EBIT ÷ total assets
- X4
- Market (Z) or book (Z′, Z″) value of equity ÷ total liabilities
- X5
- Sales ÷ total assets (not used in Z″)
Worked examples
Healthy public manufacturer
The ratios are 0.18, 0.30, 0.12, 1.4286 and 1.40. Weighted: 0.216 + 0.42 + 0.396 + 0.857 + 1.40 = 3.29, above the 2.99 cut-off, so the company sits in the safe zone.
Private manufacturer, Z' model
X1 = 0.075, X2 = 0.10, X3 = 0.045, X4 = 0.3333 and X5 = 1.30. Z' = 0.717×0.075 + 0.847×0.10 + 3.107×0.045 + 0.42×0.3333 + 0.998×1.30 ≈ 1.72, between 1.23 and 2.9 — the grey zone.
Struggling service company, Z'' model
Negative working capital and accumulated losses drive the first two ratios below zero. Z'' = 6.56×(−0.05) + 3.26×(−0.12) + 6.72×0.01 + 1.05×0.1765 ≈ −0.47, well below the 1.1 distress cut-off.
Frequently asked questions
What is a good Altman Z-score?+
For the original model, a score above 2.99 is the safe zone, 1.81 to 2.99 is the grey zone and below 1.81 signals distress. The private (Z′) and non-manufacturing (Z″) models use different cut-offs: 2.9/1.23 and 2.6/1.1.
How accurate is the Z-score?+
In Altman’s original 1968 sample it correctly classified about 95% of firms one year before bankruptcy, with accuracy falling over longer horizons. Later tests show it remains a useful screen but produces false alarms, so it should not be used alone.
Can I use the Z-score for banks or financial companies?+
No. Banks, insurers and other financial firms have balance sheets dominated by financial assets and liabilities, so the ratios behave differently. The models were built on manufacturing and, for Z″, non-financial companies.
Which version should I use for a private company?+
Use Z′ for private manufacturers, because it substitutes book equity for market value and has re-estimated weights. For private service or non-manufacturing firms, use Z″, which also drops the sales-to-assets ratio.
Why can the Z-score be negative?+
Working capital, retained earnings and EBIT can all be negative for loss-making companies. When those ratios are negative and large enough, the weighted sum falls below zero — a strong distress signal.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.