Altman Z-Score

The Altman Z-Score is a financial formula used to assess a company's likelihood of bankruptcy within the next two years. It combines five key financial ratios, which measure aspects like profitability, asset efficiency, and leverage. The resulting score helps investors and analysts evaluate a company's financial health: a higher score suggests a lower risk of bankruptcy, while a lower score indicates higher risk. Developed in the 1960s by Edward Altman, this tool is widely used to predict financial distress and guide investment decisions.