Altman Z-Score Calculator

The Altman Z-Score calculator estimates a company’s financial-distress signal from five weighted accounting and market ratios. It is designed for the classic public-company version of the model: liquidity, cumulative profitability, operating earning power, market leverage, and asset turnover are combined into one score. The result is then mapped to a distress zone, grey zone, or safe zone using the cutoffs coded in the calculator.

This is not a generic credit-rating engine. It follows the calculation in the form exactly, including the reported retained-earnings input and working-capital components. That precision matters because small modeling differences can move a borderline company from the grey zone to the distress zone. Use the score beside the accrual ratio calculator for earnings-quality checks, the Additional Funds Needed calculator for growth funding pressure, and the free float calculator for market liquidity context.

Inputs and calculation path

Enter sales, EBIT, total assets, and total liabilities from the same reporting period. Total assets and total liabilities must be greater than zero because they appear in denominators. Next, enter reported current assets and current liabilities from that balance sheet. The calculator uses their difference as working capital, matching factor A in the original public-manufacturer model.

Then enter reported retained earnings, shares outstanding, and share price. The form estimates market value of equity as share price multiplied by shares outstanding. Retained earnings is a cumulative balance-sheet account and may be negative.

Formula used by this calculator

The exact weighted sum is:

$\text{Z} = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E$

where:

The component definitions used by the form are:

$\text{net working capital} = \text{current assets} - \text{current liabilities}$

Use the reported balance-sheet retained-earnings balance directly; no one-period dividend shortcut is applied.

$\text{market value of equity} = \text{share price} \times \text{shares outstanding}$

The zone logic is also exact: a score below 1.81 is the distress zone, a score above 2.99 is the safe zone, and every score from 1.81 through 2.99 is the grey zone.

Example

Use the calculator’s default inputs: sales of $10,000,000, EBIT of $4,000,000, total assets of $50,000,000, total liabilities of $20,000,000, current assets of $500,000, current liabilities of $100,000, retained earnings of $500,000, shares outstanding of 1,000,000, and share price of $20.

Net working capital is $500,000 − $100,000 = $400,000. The A factor is $400,000 / $50,000,000 = 0.0080. Reported retained earnings are $500,000, so B is $500,000 / $50,000,000 = 0.0100. EBIT over assets is $4,000,000 / $50,000,000 = 0.0800. Market value of equity is $20 × 1,000,000 = $20,000,000, so D is $20,000,000 / $20,000,000 = 1.0000. Sales over assets is $10,000,000 / $50,000,000 = 0.2000.

Apply the exact coefficients:

$\text{Z} = 1.2(0.0080) + 1.4(0.0100) + 3.3(0.0800) + 0.6(1.0000) + 1.0(0.2000)$

The weighted pieces are 0.0096, 0.0140, 0.2640, 0.6000, and 0.2000. Their sum is 1.0876. The calculator displays 1.0876 and labels it Distress zone because it is below 1.81. The note also highlights the $20,000,000 market value of equity and $400,000 of net working capital that feed the model.

Interpreting the five drivers

The A factor reflects reported working capital relative to the asset base. A weak A factor may signal short-term liquidity pressure. The B factor reflects accumulated profitability using the reported retained-earnings balance. The C factor is often powerful because EBIT over assets measures operating return before financing structure. The D factor gives credit for a market equity cushion relative to liabilities. The E factor rewards asset turnover, which can be high in lower-margin businesses and lower in asset-heavy companies.

The model is useful because it forces several dimensions into one view. A company may have strong sales over assets but poor EBIT, or a large market capitalization but weak working capital. The score shows how those effects net out under fixed weights. However, fixed weights are also a limitation. Banks, insurers, startups, utilities, real estate companies, and highly seasonal businesses can require different credit tools. Compare the result with the sustainable growth rate calculator, MVA calculator, and debt-to-equity calculator before drawing conclusions about solvency or value creation.

Caveats for real analysis

Do not treat the Z-Score as a bankruptcy probability, valuation opinion, or trading signal. It is a screening model. Market value of equity can change faster than financial statements, so scores based on stale share prices can be misleading. Retained earnings can include years of buybacks, dividends, losses, accounting changes, and acquisitions, so use the reported balance rather than a one-period proxy. Total liabilities may include operating and financing obligations with different risk profiles.

The best use is disciplined triage. Track the same company over multiple periods, compare it with peers, and read the financial statement notes behind sudden changes. If a score moves from 2.4 to 1.6, find the driver before reacting. It may be a market selloff, an operating profit decline, a balance-sheet expansion, a dividend policy change, or a data-entry mismatch.

Displayed results use the currency, time period, percentage, or other units named in the tool and round only for presentation; retain additional precision when carrying a result into another calculation.

Method and source limits

This is Altman’s 1968 five-factor model for publicly traded manufacturers, using current assets minus current liabilities for working capital, reported retained earnings, and the original 1.2/1.4/3.3/0.6/1.0 coefficients. This page applies the historical screening zones as below 1.81, 1.81 through 2.99, and above 2.99. It is not the private-company, emerging-market, or later Z-model variant. Sources and linked guidance below were accessed July 9, 2026; later revisions are outside this page version.

Sources

• Edward I. Altman, Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy, The Journal of Finance 23(4), September 1968, pp. 589–609 — primary publication for the public-manufacturer model, variables, coefficients, sample, and historical interpretation.
• Corporate Finance Institute, Altman’s Z-Score Model — overview of the classic financial-distress model.
• Wall Street Prep, Altman Z-Score — formula, interpretation, and zone discussion.
• NYU Stern, Aswath Damodaran, Ratings, Interest Coverage Ratios and Default Spread — credit-risk and default-spread context.