Altman Z Score
Returns the Altman Z-Score, a formula that predicts the probability of a company going bankrupt. Developed by Professor Edward Altman in 1968.
Interpretation
| Z-Score | Risk Zone |
|---|---|
| > 2.99 | Safe Zone - Low bankruptcy risk |
| 1.81 - 2.99 | Grey Zone - Moderate risk |
| < 1.81 | Distress Zone - High bankruptcy risk |
Formula Components (5 Variables)
Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
- A = Working Capital / Total Assets
- B = Retained Earnings / Total Assets
- C = EBIT / Total Assets
- D = Market Value of Equity / Total Liabilities
- E = Sales / Total Assets
Notes
- Higher score indicates lower bankruptcy risk
- Originally designed for manufacturing companies
- Still widely used as a financial health indicator
Syntax
=AltmanZScore()Returns
number
Altman Z-Score value
Examples
=AltmanZScore()=IF(AltmanZScore()>2.99,"Safe","Review")=IF(AltmanZScore()<1.81,"Distress","")When to Use
- Credit analysis and lending decisions
- Investment due diligence
- Financial health screening
- Risk management
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Earnings manipulation | BeneishMScore() |
| Financial strength score | FScore() |
| Service companies | Modified Z-Score models |
| Current valuation | PE, PB ratios |
Common Issues & FAQ
What is a good Z-Score?
Above 2.99 is considered safe. Between 1.81-2.99 is a grey zone. Below 1.81 indicates potential distress.
Does this work for all companies?
The original model was for manufacturing. Different versions exist for service, private, and emerging market companies.
How accurate is this predictor?
Studies show 80-90% accuracy in predicting bankruptcy within 2 years, but it's not foolproof.
Related Formulas
More MarketXLS Valuation formulas you can use in the same worksheet:
See AltmanZScore used in a complete workbook: Altman Z-Score Screener Excel: Bankruptcy Risk Dashboard (May 2026)
Get Access to 1 Billion Usable Market data points IN YOUR EXCEL SHEETS WITH EASY TO USE EXCEL FUNCTIONS
Get started today
▶
How does MarketXLS work?