---
title: The Altman Z-score as explained by Brian Feroldi
description: "The Altman Z-Score is a formula developed by Edward Altman in the 1960s. It is used to predict the likelihood of a company going bankrupt within two years.\n\nThe Z-Score uses five different financial ratios to come up with a single number that measures the company's financial health.\n\nAltman Z-Score breaks down into five major components:\n• 𝗪𝗼𝗿𝗸𝗶𝗻𝗴 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝘁𝗼 𝗧𝗼𝘁𝗮𝗹 𝗔𝘀𝘀𝗲𝘁𝘀 - A measure of 𝗹𝗶𝗾𝘂𝗶𝗱𝗶𝘁𝘆\n• 𝗥𝗲𝘁𝗮𝗶𝗻𝗲𝗱 𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝘁𝗼 𝗧𝗼𝘁𝗮𝗹 𝗔𝘀𝘀𝗲𝘁𝘀 - A measure of 𝗽𝗿𝗼𝗳𝗶𝘁𝗮𝗯𝗶𝗹𝗶𝘁𝘆\n• 𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗕𝗲𝗳𝗼𝗿𝗲 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗮𝗻𝗱 𝗧𝗮𝘅𝗲𝘀 𝘁𝗼 𝗧𝗼𝘁𝗮𝗹 𝗔𝘀𝘀𝗲𝘁𝘀 - A measure of 𝗼𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗲𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝗰𝘆\n• 𝗠𝗮𝗿𝗸𝗲𝘁 𝗩𝗮𝗹𝘂𝗲 𝗼𝗳 𝗘𝗾𝘂𝗶𝘁𝘆 𝘁𝗼 𝗧𝗼𝘁𝗮𝗹 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀 - A measure of 𝘀𝗼𝗹𝘃𝗲𝗻𝗰𝘆\n• 𝗦𝗮𝗹𝗲𝘀 𝘁𝗼 𝗧𝗼𝘁𝗮𝗹 𝗔𝘀𝘀𝗲𝘁𝘀 - A measure of 𝗮𝘀𝘀𝗲𝘁 𝘁𝘂𝗿𝗻𝗼𝘃𝗲𝗿\n\n𝗛𝗲𝗿𝗲'𝘀 𝗮 𝗯𝗿𝗲𝗮𝗸𝗱𝗼𝘄𝗻 𝗼𝗳 𝘁𝗵𝗲 𝗳𝗼𝗿𝗺𝘂𝗹𝗮:\n(1.2 × Working Capital/Total Assets)\n+\n(1.4 × Retained Earnings/Total Assets)\n-\n(3.3 × EBIT/Total Assets)\n+\n(0.6 × Market Value Equity/Total Liabilities)\n-\n(1.0 x Sales/Total Assets)\n=\nAltman Z-Score\n\nAltman Z-Score RESULTS:\n\n0.0 - 1.8 = Distress Zone\n1.8 - 3.0 = Grey Zone\n3.0 - 4.0+ = Safe Zone"
---

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# [The Altman Z-score as explained by Brian Feroldi](https://blog.syzgroup.com/syz-the-moment/the-altman-z-score-as-explained-by-brian-feroldi)

 Written by [Charles-Henry Monchau, CFA, CMT, CAIA](https://blog.syzgroup.com/syz-the-moment/author/charles-henry-monchau) | Apr 29, 2024, 12:26:11 PM

[View full post](https://blog.syzgroup.com/syz-the-moment/the-altman-z-score-as-explained-by-brian-feroldi)

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