Estimate the original public-firm Altman Z from working capital, retained earnings, EBIT, market equity, sales, and total assets.
| Z-score | – |
Use this Altman Z-score calculator for the 1968 public-manufacturing formula. It is a distress screen, not a forecast of bankruptcy and not the private-firm (Z′) or emerging-market (Z″) variants.
Z = 1.2×(working capital ÷ assets) + 1.4×(retained earnings ÷ assets) + 3.3×(EBIT ÷ assets) + 0.6×(market equity ÷ assets) + 1.0×(sales ÷ assets). Keep every money figure in the same units (all thousands, or all millions). This page uses market equity over total assets for the fourth term, matching the inputs available here; textbooks often use market equity over total liabilities instead.
Published bands for this original model: Z above 2.99 is the “safe” zone, below 1.81 is the “distress” zone, and 1.81 to 2.99 is the grey zone.
Working capital: Current assets minus current liabilities. Can be negative.
Retained earnings: Cumulative retained earnings on the balance sheet. Can be negative.
EBIT: Operating profit before interest and tax.
Market equity: Market capitalisation (shares × price), not book equity.
Sales: Revenue for the year.
Total assets: Total assets, the common denominator.
Z: The Altman Z-score.
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