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The Altman Z-score is a statistical tool used to assess the financial health of a company. It is based on the company’s current assets, current liabilities, quick assets, and retained earnings.
Z-score = 0.5232 + 0.1999*X - 1.2824*Y
What is a good Altman Z-Score?
A good Altman Z-Score is typically above 2.99, indicating that the company is in a safe financial zone and has a low risk of bankruptcy.
What does an Altman’s Z-Score of 3.5 indicate?
An Altman Z-Score of 3.5 suggests a very strong financial position, with a low risk of bankruptcy in the near future.
What is a 2.7 Altman Z-Score?
A Z-Score of 2.7 falls in the “gray area,” meaning the company is not at immediate risk of bankruptcy but is also not completely safe. Caution is advised.
Why do we use the Altman Z-Score?
The Altman Z-Score is used to assess a company’s likelihood of bankruptcy by analyzing financial ratios. It helps investors and analysts evaluate financial health.
Is a high or low Z-Score better?
A higher Z-Score is better, as it indicates a lower risk of bankruptcy. Scores below 1.8 suggest financial distress, while scores above 2.99 are considered safe.
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