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Altman's Z Score Model Formula

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Zeta Value is a measure of a company's financial health and likelihood of bankruptcy. Check FAQs

ζ = 1.2 \cdot A + 1.4 \cdot RE + 3.3 \cdot C + 0.6 \cdot D. + 1.0 \cdot E

ζ - Zeta Value?A - Working Capital?RE - Retained Earnings?C - Earnings Before Interest and Taxes?D. - Market Value of Equity?E - Total Sales?

Altman's Z Score Model Example

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Here is how the Altman's Z Score Model equation looks like with Values.

Here is how the Altman's Z Score Model equation looks like with Units.

Here is how the Altman's Z Score Model equation looks like.

264300 = 1.2 \cdot 60000 + 1.4 \cdot 3500 + 3.3 \cdot 40000 + 0.6 \cdot 9000 + 1.0 \cdot 50000

264300 = 1.2 \cdot 60000 + 1.4 \cdot 3500 + 3.3 \cdot 40000 + 0.6 \cdot 9000 + 1.0 \cdot 50000

264300 = 1.2 \cdot 60000 + 1.4 \cdot 3500 + 3.3 \cdot 40000 + 0.6 \cdot 9000 + 1.0 \cdot 50000

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Altman's Z Score Model Solution

Follow our step by step solution on how to calculate Altman's Z Score Model?

FIRST Step Consider the formula

ζ = 1.2 \cdot A + 1.4 \cdot RE + 3.3 \cdot C + 0.6 \cdot D. + 1.0 \cdot E

Next Step Substitute values of Variables

∴

ζ = 1.2 \cdot 60000 + 1.4 \cdot 3500 + 3.3 \cdot 40000 + 0.6 \cdot 9000 + 1.0 \cdot 50000

Next Step Prepare to Evaluate

∴

ζ = 1.2 \cdot 60000 + 1.4 \cdot 3500 + 3.3 \cdot 40000 + 0.6 \cdot 9000 + 1.0 \cdot 50000

LAST Step Evaluate

∴

ζ = 264300

Altman's Z Score Model Formula Elements

Variables

Zeta Value

Zeta Value is a measure of a company's financial health and likelihood of bankruptcy.

Symbol: ζ

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Zeta Value

Working Capital

Working Capital measures the liquidity and short-term financial health of a business, indicating the company's ability to meet its short-term obligations with its current assets.

Symbol: A

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Working Capital

Retained Earnings

Retained Earnings represent the cumulative profits that a company has retained and reinvested into its business over time, rather than distributing them to shareholders as dividends.

Symbol: RE

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Retained Earnings

Earnings Before Interest and Taxes

Earnings Before Interest and Taxes is a measure of a company's profitability that reflects its operating performance before considering the effects of interest expense and income taxes.

Symbol: C

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Earnings Before Interest and Taxes

Market Value of Equity

Market Value of Equity is a financial metric that represents the total value of a company's outstanding shares of common stock in the open market.

Symbol: D.

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Market Value of Equity

Total Sales

Total Sales represents the aggregate amount of money generated by a company from its primary business activities over a specific period.

Symbol: E

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Total Sales

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How to Evaluate Altman's Z Score Model?

Altman's Z Score Model evaluator uses Zeta Value = 1.2*Working Capital+1.4*Retained Earnings+3.3*Earnings Before Interest and Taxes+0.6*Market Value of Equity+1.0*Total Sales to evaluate the Zeta Value, Altman's Z Score Model is a quantitative financial tool used to assess the probability of bankruptcy for publicly traded manufacturing companies. Zeta Value is denoted by ζ symbol.

How to evaluate Altman's Z Score Model using this online evaluator? To use this online evaluator for Altman's Z Score Model, enter Working Capital (A), Retained Earnings (RE), Earnings Before Interest and Taxes (C), Market Value of Equity (D.) & Total Sales (E) and hit the calculate button.

FAQs on Altman's Z Score Model

What is the formula to find Altman's Z Score Model?

The formula of Altman's Z Score Model is expressed as Zeta Value = 1.2*Working Capital+1.4*Retained Earnings+3.3*Earnings Before Interest and Taxes+0.6*Market Value of Equity+1.0*Total Sales. Here is an example- 264300 = 1.2*60000+1.4*3500+3.3*40000+0.6*9000+1.0*50000.

How to calculate Altman's Z Score Model?

With Working Capital (A), Retained Earnings (RE), Earnings Before Interest and Taxes (C), Market Value of Equity (D.) & Total Sales (E) we can find Altman's Z Score Model using the formula - Zeta Value = 1.2*Working Capital+1.4*Retained Earnings+3.3*Earnings Before Interest and Taxes+0.6*Market Value of Equity+1.0*Total Sales.

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Altman's Z Score Model Formula

Altman's Z Score Model Example

Altman's Z Score Model Solution

Altman's Z Score Model Formula Elements

Other formulas in Equity category

How to Evaluate Altman's Z Score Model?

FAQs on Altman's Z Score Model

Variable Name