---
title: "Definition of Z-Score"
url: https://signalscreener.fr/definition/altman-z/
markdown_url: https://signalscreener.fr/definition/altman-z.md
description: "A formula predicting the probability of a company going bankrupt within two years."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "Z-Score"
  - "Altman Z-Score"
translations:
  de: https://signalscreener.fr/de/definition/altman-z.md
  es: https://signalscreener.fr/es/definition/altman-z.md
  fr: https://signalscreener.fr/fr/definition/altman-z.md
  it: https://signalscreener.fr/it/definition/altman-z.md
  pt: https://signalscreener.fr/pt/definition/altman-z.md
  zh: https://signalscreener.fr/zh/definition/altman-z.md
---

# Altman Z-Score

## What is Z-Score?

A formula predicting the probability of a company going bankrupt within two years.

## Think of it like this

Like a financial health check-up that predicts if a company might 'get sick' (go bankrupt) soon.

## Formula

```
Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
```

- **A: Working Capital/Assets**: Liquidity relative to size
- **B: Retained Earnings/Assets**: Cumulative profitability
- **C: EBIT/Assets**: Operating profitability
- **D: Market Cap/Liabilities**: Market confidence vs debt

## Why it matters

- Developed by NYU professor Edward Altman in 1968
- Accurately predicted 80-90% of bankruptcies
- Quick assessment of financial distress risk
- Used by creditors and investors worldwide

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| > 2.99 | Safe Zone | Low bankruptcy risk |
| 1.81-2.99 | Grey Zone | Some risk, needs monitoring |
| < 1.81 | Distress Zone | High bankruptcy probability |
| < 0 | Critical | Severe financial distress |

## Real-world example

Enron's Z-Score was in the distress zone for years before its collapse.

---

This is educational content, not financial advice.

Source: [Definition of Z-Score](https://signalscreener.fr/definition/altman-z/) on Signal Screener. Free to quote and cite with attribution and a link to that URL, which is the canonical one.

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