FORMIAX

 

Altman's Z-score

 

 

Z = 1.2 x1 + 1.4 x2 + 3.3 x3 + 0.6 x4 + 1 x5

x1 = Net operating capital / Total capital (assets)                 

x2 = Retained earnings / Total capital        

x3 = Earnings before interest and taxes / Total capital

x4 = Market value of equity (market price of shares) / Foreign capital

x5 = Turnover (revenue) / Total capital

WHAT IS IT?
Altman's analysis is one of the most effective financial analyses that allows you to define the state and direction of an organization with a certain probability based on six selected indicators, thereby being able to predict its future. More here

 

 

CALCULATION:

Enter total capital

Enter foreign capital

Enter net operating capital

Enter retained earnings

Enter earnings before interest and taxes

Enter market value of equity (market price of shares)

Enter turnover (revenue))

Enter the number of decimal places

EXAMPLE:

The company's total assets are valued at $3,500,000, while they have operating capital of $4,200,000 USD. Their liabilities reach $5,000,000 USD, while retained earnings amount to $800,000 USD. Earnings before interest and taxes reached $6,500,000. Total revenues are $8,300,000 USD, while the market value of equity is $7,000,000 USD.

Z = (1.2 x A) + (1.4 x B) + (3.3 x C) + (0.6 x D) + (0.999 x E)

(1.2 x (4,200,000 / 3,500,000)) + (1.4 x (800,000 / 3,500,000)) + (3.3 x (6,500,000 / 3,500,000)) + (0.6 x (7,000,000 / 5,000,000)) + (0.999 x (8,300,000 / 3,500,000))

= (1.2 x 1.2) + (1.4 x 0.299) + (3.3 x 1.857) + (0.6 x 1.4) + (0.999 x 2.371)

Altman Z-Score = 11.097 - Safe Zone.

 

EXAMPLE:

The company's total assets are valued at $3,500,000, while they have operating capital of $4,200,000 USD. Their liabilities reach $5,000,000 USD, while retained earnings amount to $800,000 USD. Earnings before interest and taxes reached $6,500,000. Total revenues are $8,300,000 USD, while the market value of equity is $7,000,000 USD.

Z = (1.2 x A) + (1.4 x B) + (3.3 x C) + (0.6 x D) + (0.999 x E)

(1.2 x (4,200,000 / 3,500,000)) + (1.4 x (800,000 / 3,500,000)) + (3.3 x (6,500,000 / 3,500,000)) + (0.6 x (7,000,000 / 5,000,000)) + (0.999 x (8,300,000 / 3,500,000))

= (1.2 x 1.2) + (1.4 x 0.299) + (3.3 x 1.857) + (0.6 x 1.4) + (0.999 x 2.371)

Altman Z-Score = 11.097 - Safe Zone.

 

 

 

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