Altman Models

Altman Models refer to a set of financial formulas developed by Professor Edward Altman in the 1960s to predict a company's likelihood of bankruptcy. The most well-known model, the Z-Score, uses various financial ratios—like profitability and leverage—to estimate credit risk. A higher score suggests a lower risk of bankruptcy, while a lower score indicates higher risk. These models are valuable tools for investors, creditors, and corporate managers to assess financial health and make informed decisions regarding investments and lending.