Altman's Z Score Model Solution

STEP 0: Pre-Calculation Summary
Formula Used
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
ζ = 1.2*A+1.4*RE+3.3*C+0.6*D.+1.0*E
This formula uses 6 Variables
Variables Used
Zeta Value - Zeta Value is a measure of a company's financial health and likelihood of bankruptcy.
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.
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.
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.
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.
Total Sales - Total Sales represents the aggregate amount of money generated by a company from its primary business activities over a specific period.
STEP 1: Convert Input(s) to Base Unit
Working Capital: 60000 --> No Conversion Required
Retained Earnings: 3500 --> No Conversion Required
Earnings Before Interest and Taxes: 40000 --> No Conversion Required
Market Value of Equity: 9000 --> No Conversion Required
Total Sales: 50000 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
ζ = 1.2*A+1.4*RE+3.3*C+0.6*D.+1.0*E --> 1.2*60000+1.4*3500+3.3*40000+0.6*9000+1.0*50000
Evaluating ... ...
ζ = 264300
STEP 3: Convert Result to Output's Unit
264300 --> No Conversion Required
FINAL ANSWER
264300 <-- Zeta Value
(Calculation completed in 00.004 seconds)
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Go Laspeyres Price Index = ((sum(x,1,2,(Price in Final Period*Quantity in Base Period)))/(sum(x,1,2,(Price in Base Period*Quantity in Base Period))))*100
Paasche Price Index
Go Paasche Price Index = ((sum(x,1,3,(Price in Final Period*Quantity in Final Period)))/(sum(x,1,3,(Price in Base Period*Quantity in Final Period))))*100
Altman's Z Score Model
Go 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
Capital Allocation Line
Go Expected Return on Portfolio = ((Expected Return on Treasury Bill*Weight of Treasury Bill)+(Expected Return of Stock*Weight of Stock))*100
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Altman's Z Score Model 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
ζ = 1.2*A+1.4*RE+3.3*C+0.6*D.+1.0*E

What is Altman's Z Score Model?

The Altman Z-Score model, developed by Edward Altman in the late 1960s, is a financial metric used to predict the likelihood of bankruptcy for publicly traded manufacturing companies. The model employs multiple financial ratios to assess a company's financial health and solvency, providing investors, creditors, and analysts with a quantitative tool for evaluating credit risk.
The Altman Z-Score model incorporates five financial ratios, weighted based on statistical analysis of bankrupt and non-bankrupt companies, to calculate a composite score. Companies with Z-Scores above a certain threshold (typically 2.6) are considered financially healthy and have a lower likelihood of bankruptcy, while those with Z-Scores below the threshold are considered financially distressed and may face higher bankruptcy risk.
The Altman Z-Score model is widely used by investors, lenders, and analysts to assess credit risk, make investment decisions, and monitor the financial health of companies.

How to Calculate Altman's Z Score Model?

Altman's Z Score Model calculator 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 calculate 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 calculate Altman's Z Score Model using this online calculator? To use this online calculator 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. Here is how the Altman's Z Score Model calculation can be explained with given input values -> 264300 = 1.2*60000+1.4*3500+3.3*40000+0.6*9000+1.0*50000.

FAQ

What is Altman's Z Score Model?
Altman's Z Score Model is a quantitative financial tool used to assess the probability of bankruptcy for publicly traded manufacturing companies and is represented as ζ = 1.2*A+1.4*RE+3.3*C+0.6*D.+1.0*E or 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. 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, 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, 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, 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 & Total Sales represents the aggregate amount of money generated by a company from its primary business activities over a specific period.
How to calculate Altman's Z Score Model?
Altman's Z Score Model is a quantitative financial tool used to assess the probability of bankruptcy for publicly traded manufacturing companies is calculated using 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 calculate Altman's Z Score Model, you need Working Capital (A), Retained Earnings (RE), Earnings Before Interest and Taxes (C), Market Value of Equity (D.) & Total Sales (E). With our tool, you need to enter the respective value for Working Capital, Retained Earnings, Earnings Before Interest and Taxes, Market Value of Equity & Total Sales and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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