Altman's Z-score

Altman's Z-score is a financial tool used to assess the likelihood of a company going bankrupt within the next two years. It analyzes several key financial ratios from a company's financial statements, such as profitability, leverage, market value, and efficiency, to produce a single score. A higher Z-score indicates a lower probability of bankruptcy, suggesting the company is financially healthy. Conversely, a lower score signals greater risk. The Z-score helps investors, lenders, and managers identify potential financial trouble early, enabling proactive measures to prevent failure.