Altman Z-Score
A weighted score that estimates a company's risk of bankruptcy within about two years.
What it is
The Altman Z-Score is a bankruptcy-prediction model developed by Professor Edward Altman in 1968. It combines five financial ratios, covering profitability, leverage, liquidity, solvency, and asset turnover, into a single weighted score. A higher score means lower distress risk, and a low score signals elevated bankruptcy risk.
Why it matters
It distills several aspects of financial health into one number, giving a fast read on distress risk that is hard to get from any single ratio. For the original manufacturing model, a score above 3 is considered safe, between 1.8 and 3 is a grey zone, and below 1.8 signals high distress risk. A key limitation is that the classic formula was built for public manufacturers, so adapted versions are needed for service firms, financials, and emerging markets.
How it's calculated
It sums five weighted ratios: 1.2 times working capital/total assets, 1.4 times retained earnings/total assets, 3.3 times EBIT/total assets, 0.6 times market value of equity/total liabilities, and 1.0 times sales/total assets.
How Quintarthai uses it
Quinn computes an Altman-Z style distress signal as part of its risk-first QuinnScore and bankruptcy/delisting flags on a company's deep-analysis page, with each input figure carrying a click-to-source provenance receipt.