Altman Z-Score Calculator (2026)

Calculate Edward Altman's 5-ratio Z-Score to predict corporate bankruptcy and financial distress risk.

Financial Statement Inputs

Calculated Altman Z-Score

3.85

Financial Solvency Zone

SAFE ZONE (Low Risk)

5 Financial Ratio Components

X1 (Working Capital / Assets * 1.2) 0.24
X2 (Retained Earnings / Assets * 1.4) 0.42
X3 (EBIT / Assets * 3.3) 0.77
X4 (Market Cap / Liabilities * 0.6) 1.80
X5 (Sales / Assets * 0.999) 1.47

Altman Z-Score Risk Zones (2026)

The Altman Z-Score categorizes companies into three distinct financial health zones:

Z-Score Range Risk Zone Probability of Insolvency
Z > 2.99 Safe Zone Negligible risk of financial distress within 2 years
1.81 ≤ Z ≤ 2.99 Grey Zone Moderate risk; warning sign requiring close monitoring
Z < 1.81 Distress Zone High probability of bankruptcy / debt default

Altman Z-Score Bankruptcy Prediction Zones

5-Ratio Model Breakdown for Manufacturing Firms

Z-Score Negative Screen

Use Altman Z-Score as a negative filter before buying turnaround stocks. Avoid companies in the Distress Zone (Z < 1.81) to stay clear of value traps and bond defaults.

Frequently Asked Questions

What is the Altman Z-Score?
The Altman Z-Score is a quantitative formula developed by NYU Professor Edward Altman that combines 5 financial ratios to predict the probability of a company entering bankruptcy within 2 years.
What is the original Altman Z-Score formula for manufacturing companies?
Formula: Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 0.999*X5, where X1 = Working Capital/Total Assets, X2 = Retained Earnings/Total Assets, X3 = EBIT/Total Assets, X4 = Market Value of Equity/Total Liabilities, X5 = Sales/Total Assets.
What are the 3 Z-Score risk zones?
Safe Zone (Z > 2.99): Low probability of financial distress. Grey Zone (1.81 <= Z <= 2.99): Moderate distress risk. Distress Zone (Z < 1.81): High probability of insolvency within 2 years.
How accurate is the Altman Z-Score in predicting insolvency?
Historical backtesting shows the Altman Z-Score has an 80%-90% accuracy rate in predicting corporate bankruptcy one year prior to insolvency.
Can Altman Z-Score be applied to banks and financial institutions?
No, the Z-Score cannot be applied to banks, insurance companies, or non-bank financial companies (NBFCs) due to their unique balance sheet structures and off-balance sheet liabilities.
What is the non-manufacturing Z'-Score formula?
For non-manufacturing and service firms, the revised Z'-Score formula omits sales turnover (X5) to avoid asset-light distortion: Z' = 6.56*X1 + 3.26*X2 + 6.72*X3 + 1.05*X4.
Which ratio carries the highest weight in the Z-Score?
X3 (EBIT / Total Assets) carries the highest weighting (3.3 multiplier), emphasizing operating earning power as the ultimate defense against bankruptcy.
How do equity investors use the Z-Score?
Investors use the Z-Score as a negative screening tool to avoid value traps, distressed debt investments, and companies facing impending credit defaults.