The Altman-Z score was developed in 1968 by Edward I. Altman on the basis of scientific research, looking for a model to predict whether a company may or may not go bankrupt. It is therefore a calculation model that allows to determine the creditworthiness of a company. Some background and the exact calculation can be found on investopedia.
For this purpose multiple ratios are used in the formula, such as:
Not all variables are equally important and therefore they are each assigned a different weight. The sum of all ratios yields a score. The higher the score, the smaller the chance the company will go bankrupt.
A score of 1.8 or less is a serious indication of a creditworthiness problem, anything over 3 gets the status 'healthy'. A score between 1.81 and 2.99 is defined as 'neutral'.
As with many other ratios and formulas, one has to deal with too fast or too general conclusions. A few points must be taken into account when interpreting the score:
Meanwhile, there are some variations on the original Altman-Z score in circulation, such as specific derivative scores for private companies or for public service companies. The filter in our screener is the original formula that is still used for public industrial companies.
You can view the Altman-Z score in the results of our stock screener. Use either the FA table or Fundamental views. (Or any custom view displaying the score of course).
You can find 2 example screens here: