Altman Z-Score Calculator (Bankruptcy Risk)
The Altman Z-Score blends five financial ratios into one number that estimates how close a public manufacturing company is to bankruptcy. Published by Edward Altman in 1968, the model uses fixed coefficients derived from a sample of firms and remains a widely cited credit-screening tool. This calculator takes working capital, retained earnings, EBIT, the market value of equity, total liabilities, sales, and total assets, builds the five ratios, and returns each weighted component and the final Z-Score with its safe, grey, or distress zone reading.
Altman Z-Score formula
X1 = working capital / total assets
X2 = retained earnings / total assets
X3 = EBIT / total assets
X4 = market value of equity / total liabilities
X5 = sales / total assets
Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 1.0*X5
The coefficients (1.2, 1.4, 3.3, 0.6, 1.0) are fixed values from Altman's original 1968 study of public manufacturers. Zones: above 2.99 safe, 1.81 to 2.99 grey, below 1.81 distress.
Reading the Z-Score
- The original model targets publicly traded manufacturing companies.
- A score above 2.99 places the firm in the safe zone with low predicted failure risk.
- A score from 1.81 to 2.99 is the grey zone, where the model is least conclusive.
- A score below 1.81 is the distress zone, flagging elevated bankruptcy probability.
- Use the Z-Score as one input alongside broader credit and qualitative analysis.
Altman Z-Score: frequently asked questions
What is the Altman Z-Score?
The Altman Z-Score is a formula published by Professor Edward Altman in 1968 that combines five weighted financial ratios into a single score to predict the probability that a public manufacturing firm will go bankrupt within two years. A higher score indicates lower bankruptcy risk.
What is the Z-Score formula?
The original model is Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 1.0*X5, where X1 is working capital over total assets, X2 is retained earnings over total assets, X3 is EBIT over total assets, X4 is the market value of equity over total liabilities, and X5 is sales over total assets.
What do the Z-Score zones mean?
For the original model, a score above 2.99 is the safe zone with low bankruptcy risk. A score between 1.81 and 2.99 is the grey zone of uncertainty. A score below 1.81 is the distress zone, signalling a high probability of financial distress within two years.
Which firms does the original Z-Score apply to?
The original five-variable model was developed for publicly traded manufacturing companies because X4 uses the market value of equity. Separate variants exist for private firms and non-manufacturers, with different coefficients and zone cutoffs. This calculator uses the original public-manufacturer model.
Is the Z-Score a guarantee of bankruptcy?
No. It is a statistical screening tool based on historical data, not a certainty. A low score flags elevated risk that warrants closer analysis, while a high score does not rule out failure. Use it alongside other financial and qualitative analysis rather than in isolation.
Official sources
- U.S. Securities and Exchange Commission: Bankruptcy.
- United States Courts: Bankruptcy.
Reviewed by the CalculatorHub team, edited by James Graham, 16 June 2026. See our methodology.