Is a 2.09 Altman Z-score safe or in danger?
On the defaults — $100,000 of working capital, $150,000 of retained earnings, $80,000 of EBIT, $500,000 of market value of equity, $500,000 of total liabilities, $900,000 of sales and $1,000,000 of total assets — the Altman Z-score is 2.09 (unrounded 2.0940000), in the grey zone. A grey Z-score does not mean the company will fail — it means the five factors together do not clear the safe line, and the company needs a closer look at earnings, sales and debts before anyone lends to it or invests in it. A score above 2.99 is safe, 1.81 to 2.99 is grey, and below 1.81 is distress — and the zones are strict: exactly 2.99 is grey, not safe, and exactly 1.81 is grey, not distress.
Three things about the model are worth stating plainly.
First, the five ratios are A = $100,000 ÷ $1,000,000 = 0.10, B = $150,000 ÷ $1,000,000 = 0.15, C = $80,000 ÷ $1,000,000 = 0.08, D = $500,000 ÷ $500,000 = 1.00 and E = $900,000 ÷ $1,000,000 = 0.90. Second, the five contributions are 1.2 × 0.10 = 0.12, 1.4 × 0.15 = 0.21, 3.3 × 0.08 = 0.26 (0.264 unrounded), 0.6 × 1.00 = 0.60 and 1.0 × 0.90 = 0.90 — and the displayed contributions sum to the displayed Z-score: 0.12 + 0.21 + 0.26 + 0.60 + 0.90 = 2.09. And third, the Z-score is 2.09 (unrounded 2.0940000) — grey, because 2.09 sits between 1.81 and 2.99; all listed in Accuracy & limitations.
The worked example, line by line
Setup: working capital $100,000, retained earnings $150,000, EBIT $80,000, market value of equity $500,000, total liabilities $500,000, sales $900,000, total assets $1,000,000.
Line 1 — ratio A. A is $100,000 ÷ $1,000,000 = 0.10, and 1.2 × A = 0.12.
Line 2 — ratio B. B is $150,000 ÷ $1,000,000 = 0.15, and 1.4 × B = 0.21.
Line 3 — ratio C. C is $80,000 ÷ $1,000,000 = 0.08, and 3.3 × C = 0.26 (0.264 unrounded).
Line 4 — ratio D. D is $500,000 ÷ $500,000 = 1.00, and 0.6 × D = 0.60.
Line 5 — ratio E. E is $900,000 ÷ $1,000,000 = 0.90, and 1.0 × E = 0.90.
Line 6 — the Z-score. The Z-score is 0.12 + 0.21 + 0.26 + 0.60 + 0.90 = 2.09 (unrounded 2.0940000).
Line 7 — the zone. 2.09 sits between 1.81 and 2.99, so the zone is grey.
Line 8 — the check. At $351,516 of EBIT the Z-score is 2.9900028 — safe; and at $1,796,000 of sales the Z-score is 2.9900000 — exactly on the safe line, grey.
Every branch, checked
EBIT $40,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $40,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.04; D 1.00; E 0.90; contributions 0.12, 0.21, 0.13, 0.60, 0.90; Altman Z-score 1.9620000; zone grey — With EBIT of $40,000 the Z-score falls to 1.96 (unrounded 1.9620000, grey) — the earnings contribution shrinks to 0.13 and the score drops 0.13.
EBIT $120,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $120,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.12; D 1.00; E 0.90; contributions 0.12, 0.21, 0.40, 0.60, 0.90; Altman Z-score 2.2260000; zone grey — With EBIT of $120,000 the Z-score rises to 2.23 (unrounded 2.2260000, grey) — the earnings contribution grows to 0.40.
EBIT $200,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $200,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.20; D 1.00; E 0.90; contributions 0.12, 0.21, 0.66, 0.60, 0.90; Altman Z-score 2.49; zone grey — With EBIT of $200,000 the Z-score rises to 2.49 (unrounded 2.4900000, grey) — still below the safe line.
EBIT $300,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $300,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.30; D 1.00; E 0.90; contributions 0.12, 0.21, 0.99, 0.60, 0.90; Altman Z-score 2.82; zone grey — With EBIT of $300,000 the Z-score rises to 2.82 (unrounded 2.8200000, grey) — close to safe, still grey.
EBIT $400,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $400,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.40; D 1.00; E 0.90; contributions 0.12, 0.21, 1.32, 0.60, 0.90; Altman Z-score 3.15; zone safe — With EBIT of $400,000 the Z-score rises to 3.15 (unrounded 3.1500000, safe) — the only EBIT branch that clears the safe line.
Total liabilities $250,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $250,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.00; E 0.90; contributions 0.12, 0.21, 0.26, 1.20, 0.90; Altman Z-score 2.6940000; zone grey — With total liabilities of $250,000 the Z-score rises to 2.69 (unrounded 2.6940000, grey) — halving the debts lifts the market-value ratio to 2.00.
Total liabilities $1,000,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $1,000,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 0.50; E 0.90; contributions 0.12, 0.21, 0.26, 0.30, 0.90; Altman Z-score 1.7940000; zone distress — With total liabilities of $1,000,000 the Z-score falls to 1.79 (unrounded 1.7940000, distress) — doubling the debts drops the market-value ratio to 0.50 and the score below the distress line.
Sales $500,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $500,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.50; contributions 0.12, 0.21, 0.26, 0.60, 0.50; Altman Z-score 1.6940000; zone distress — With sales of $500,000 the Z-score falls to 1.69 (unrounded 1.6940000, distress) — the sales contribution shrinks to 0.50.
Sales $1,500,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $1,500,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 1.50; contributions 0.12, 0.21, 0.26, 0.60, 1.50; Altman Z-score 2.6940000; zone grey — With sales of $1,500,000 the Z-score rises to 2.69 (unrounded 2.6940000, grey) — the sales contribution grows to 1.50.
Working capital $300,000: working capital $300,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.30; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.36, 0.21, 0.26, 0.60, 0.90; Altman Z-score 2.3340000; zone grey — With working capital of $300,000 the Z-score rises to 2.33 (unrounded 2.3340000, grey) — the working-capital contribution grows to 0.36.
Working capital $0: working capital $0.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.00; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.00, 0.21, 0.26, 0.60, 0.90; Altman Z-score 1.9740000; zone grey — With working capital of $0 the Z-score falls to 1.97 (unrounded 1.9740000, grey) — the working-capital contribution is zero.
The reverses, worked backwards
Smallest EBIT for the Z-score to REACH 2.99: At the displayed $351,516 the figures are working capital $100,000.00; retained earnings $150,000.00; EBIT $351,516.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.35; D 1.00; E 0.90; contributions 0.12, 0.21, 1.16, 0.60, 0.90; Altman Z-score 2.9900028; zone safe. At $351,516 the Z-score is 2.9900028 (unrounded) — it displays as 2.99 and is above the safe line, so the zone is safe. At $351,515 the Z-score is 2.9899995 (unrounded) — it displays as 2.99 but is below the safe line, so the zone is grey — so $351,516 is the smallest EBIT for the Z-score to reach 2.99.
Largest total liabilities for the Z-score to STAY at or above 2.99: At the displayed $200,534 the figures are working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $200,534.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.49; E 0.90; contributions 0.12, 0.21, 0.26, 1.50, 0.90; Altman Z-score 2.9900057; zone safe. At $200,534 the Z-score is 2.9900057 (unrounded) — it displays as 2.99 and is above the safe line, so the zone is safe. At $200,535 the Z-score is 2.9899982 (unrounded) — it displays as 2.99 but is below the safe line, so the zone is grey — so $200,534 is the largest total liabilities for the Z-score to stay at or above 2.99.
Smallest sales for the Z-score to REACH 2.99: At the displayed $1,796,000 the figures are working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $1,796,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 1.80; contributions 0.12, 0.21, 0.26, 0.60, 1.80; Altman Z-score 2.99; zone grey. At $1,796,000 the Z-score is 2.9900000 (unrounded) — exactly on the safe line, so the zone is grey, not safe. At $1,795,999 the Z-score is 2.9899990 (unrounded) — below the line, grey. One more dollar of sales, $1,796,001, gives 2.9900010 (unrounded) — above the line, safe — so $1,796,000 is the smallest sales for the Z-score to reach 2.99, and it sits exactly on the line.
Largest total liabilities for the Z-score to STAY at or above 1.81: At the displayed $949,367 the figures are working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $949,367.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 0.53; E 0.90; contributions 0.12, 0.21, 0.26, 0.32, 0.90; Altman Z-score 1.81; zone grey. At $949,367 the Z-score is 1.8100000 (unrounded) — exactly on the distress line, so the zone is grey, not distress. At $949,368 the Z-score is 1.8099997 (unrounded) — below the line, distress — so $949,367 is the largest total liabilities for the Z-score to stay at or above 1.81, and it sits exactly on the line.
Smallest market value of equity for the Z-score to REACH 2.99: At the displayed $1,246,667 the figures are working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $1,246,667.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.49; E 0.90; contributions 0.12, 0.21, 0.26, 1.50, 0.90; Altman Z-score 2.9900004; zone safe. At $1,246,667 the Z-score is 2.9900004 (unrounded) — it displays as 2.99 and is above the safe line, so the zone is safe. At $1,246,666 the Z-score is 2.9899992 (unrounded) — it displays as 2.99 but is below the safe line, so the zone is grey — so $1,246,667 is the smallest market value of equity for the Z-score to reach 2.99.
Smallest sales for the Z-score to REACH 1.81: At the displayed $616,000 the figures are working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $616,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.62; contributions 0.12, 0.21, 0.26, 0.60, 0.62; Altman Z-score 1.81; zone grey. At $616,000 the Z-score is 1.8100000 (unrounded) — exactly on the distress line, so the zone is grey, not distress. At $615,999 the Z-score is 1.8099990 (unrounded) — below the line, distress — so $616,000 is the smallest sales for the Z-score to reach 1.81, and it sits exactly on the line.
A warning about the neighbours: every neighbour above sits one dollar from the star, and every neighbour displays as the target when rounded to two decimals, yet sits below or above it. The Z-score is linear in each input except total liabilities, where it is one over the liabilities, so every reverse has an exact closed form: the EBIT needed is the target minus the rest of the score, times total assets, divided by 3.3; the sales needed is the same, times total assets, divided by 1.0; the market value needed is the same, times total liabilities, divided by 0.6; and the liabilities allowed are 0.6 times the market value, divided by the target minus the rest of the score. The page prints the unrounded Z-scores in full so the rounding does not mislead you: 2.9900028, 2.9899995, 2.9900057, 2.9899982, 2.9900000, 2.9899990, 2.9900010, 1.8100000, 1.8099997, 2.9900004, 2.9899992 and 1.8099990.
What the defaults assume
The defaults are working capital $100,000, retained earnings $150,000, EBIT $80,000, market value of equity $500,000, total liabilities $500,000, sales $900,000 and total assets $1,000,000 — working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.12, 0.21, 0.26, 0.60, 0.90; Altman Z-score 2.09; zone grey. With EBIT $40,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $40,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.04; D 1.00; E 0.90; contributions 0.12, 0.21, 0.13, 0.60, 0.90; Altman Z-score 1.9620000; zone grey. With EBIT $120,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $120,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.12; D 1.00; E 0.90; contributions 0.12, 0.21, 0.40, 0.60, 0.90; Altman Z-score 2.2260000; zone grey. With EBIT $200,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $200,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.20; D 1.00; E 0.90; contributions 0.12, 0.21, 0.66, 0.60, 0.90; Altman Z-score 2.49; zone grey. With EBIT $300,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $300,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.30; D 1.00; E 0.90; contributions 0.12, 0.21, 0.99, 0.60, 0.90; Altman Z-score 2.82; zone grey. With EBIT $400,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $400,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.40; D 1.00; E 0.90; contributions 0.12, 0.21, 1.32, 0.60, 0.90; Altman Z-score 3.15; zone safe — the only EBIT branch that is safe. With Total liabilities $250,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $250,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.00; E 0.90; contributions 0.12, 0.21, 0.26, 1.20, 0.90; Altman Z-score 2.6940000; zone grey. With Total liabilities $1,000,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $1,000,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 0.50; E 0.90; contributions 0.12, 0.21, 0.26, 0.30, 0.90; Altman Z-score 1.7940000; zone distress — distress. With Sales $500,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $500,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.50; contributions 0.12, 0.21, 0.26, 0.60, 0.50; Altman Z-score 1.6940000; zone distress — distress. With Sales $1,500,000, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $1,500,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 1.50; contributions 0.12, 0.21, 0.26, 0.60, 1.50; Altman Z-score 2.6940000; zone grey. With Working capital $300,000, working capital $300,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.30; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.36, 0.21, 0.26, 0.60, 0.90; Altman Z-score 2.3340000; zone grey. With Working capital $0, working capital $0.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.00; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.00, 0.21, 0.26, 0.60, 0.90; Altman Z-score 1.9740000; zone grey. With Total assets $0, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $0.00; Altman Z-score undefined — every ratio divides by total assets — every ratio divides by total assets, so the Z-score is undefined. With Working capital −$50,000, working capital −$50,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A −0.05; B 0.15; C 0.08; D 1.00; E 0.90; contributions −0.06, 0.21, 0.26, 0.60, 0.90; Altman Z-score 1.9140000; zone grey (unrounded 1.9140000) — the working-capital contribution goes negative (−0.06) and drags the score down. With EBIT −$100,000, working capital $100,000.00; retained earnings $150,000.00; EBIT −$100,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C −0.10; D 1.00; E 0.90; contributions 0.12, 0.21, −0.33, 0.60, 0.90; Altman Z-score 1.50; zone distress (unrounded 1.5000000) — the earnings contribution goes negative (−0.33) and the score falls into distress. With Fractional inputs, working capital $123,456.78; retained earnings $234,567.89; EBIT $87,654.32; market value of equity $456,789.12; total liabilities $345,678.90; sales $987,654.32; total assets $1,234,567.89; A 0.10; B 0.19; C 0.07; D 1.32; E 0.80; contributions 0.12, 0.27, 0.23, 0.79, 0.80; Altman Z-score 2.2131556; zone grey (unrounded 2.2131556) — the ratios are A 0.1000000, B 0.1900000, C 0.0710000, D 1.3214261 and E 0.8000000. With EBIT $351,515, working capital $100,000.00; retained earnings $150,000.00; EBIT $351,515.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.35; D 1.00; E 0.90; contributions 0.12, 0.21, 1.16, 0.60, 0.90; Altman Z-score 2.9899995; zone grey (unrounded 2.9899995) — displays 2.99 but is below the safe line. With Sales $615,999, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $615,999.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.62; contributions 0.12, 0.21, 0.26, 0.60, 0.62; Altman Z-score 1.8099990; zone distress (unrounded 1.8099990) — displays 1.81 but is distress. With Total liabilities $0, working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $0.00; sales $900,000.00; total assets $1,000,000.00; Altman Z-score undefined — market value ÷ total liabilities — market value ÷ total liabilities, so the Z-score is undefined. With All-zero numerators, working capital $0.00; retained earnings $0.00; EBIT $0.00; market value of equity $0.00; total liabilities $500,000.00; sales $0.00; total assets $1,000,000.00; A 0.00; B 0.00; C 0.00; D 0.00; E 0.00; contributions 0.00, 0.00, 0.00, 0.00, 0.00; Altman Z-score 0.00; zone distress — nothing earned, nothing kept, nothing sold, no market value, so the Z-score is 0.00.
A note on the rounding: the Z-score is displayed to two decimals, half-up. At $351,516 of EBIT the unrounded Z-score is 2.9900028 — it displays as 2.99 and is above the safe line. At $351,515 of EBIT the unrounded Z-score is 2.9899995 — it displays as 2.99 but is below the safe line. At $200,534 of total liabilities the unrounded Z-score is 2.9900057 — it displays as 2.99 and is above the safe line. At $200,535 of total liabilities the unrounded Z-score is 2.9899982 — it displays as 2.99 but is below the safe line. At $1,796,000 of sales the unrounded Z-score is 2.9900000 — exactly on the safe line, grey. At $1,795,999 of sales the unrounded Z-score is 2.9899990 — below the line, grey. At $1,796,001 of sales the unrounded Z-score is 2.9900010 — above the line, safe. At $949,367 of total liabilities the unrounded Z-score is 1.8100000 — exactly on the distress line, grey. At $949,368 of total liabilities the unrounded Z-score is 1.8099997 — below the line, distress. At $1,246,667 of market value of equity the unrounded Z-score is 2.9900004 — above the safe line. At $1,246,666 the unrounded Z-score is 2.9899992 — below the safe line. At $616,000 of sales the unrounded Z-score is 1.8100000 — exactly on the distress line, grey. At $615,999 of sales the unrounded Z-score is 1.8099990 — below the line, distress. At −$50,000 of working capital the unrounded Z-score is 1.9140000 — grey. At −$100,000 of EBIT the unrounded Z-score is 1.5000000 — distress. With the fractional inputs the unrounded Z-score is 2.2131556 — grey. The page prints the unrounded Z-scores so the rounding does not mislead you.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| Working capital | input | $100,000.00. |
| Retained earnings | input | $150,000.00. |
| EBIT | input | $80,000.00. |
| Market value of equity | input | $500,000.00. |
| Total liabilities | input | $500,000.00. |
| Sales | input | $900,000.00. |
| Total assets | input | $1,000,000.00. |
| A | working capital ÷ total assets | 0.10. |
| B | retained earnings ÷ total assets | 0.15. |
| C | EBIT ÷ total assets | 0.08. |
| D | market value of equity ÷ total liabilities | 1.00. |
| E | sales ÷ total assets | 0.90. |
| 1.2·A | 1.2 × A | 0.12. |
| 1.4·B | 1.4 × B | 0.21. |
| 3.3·C | 3.3 × C | 0.26. |
| 0.6·D | 0.6 × D | 0.60. |
| 1.0·E | 1.0 × E | 0.90. |
| Altman Z-score | 1.2·A + 1.4·B + 3.3·C + 0.6·D + 1.0·E | 2.09. |
| Zone | safe above 2.99, grey 1.81–2.99, distress below 1.81 | grey. |
| Verdict | which zone the Z-score falls in | 2.09 — grey zone (1.81–2.99). |
| Reverse: Smallest EBIT (to the dollar) for the Z-score to REACH 2.99 | step | $351,516: working capital $100,000.00; retained earnings $150,000.00; EBIT $351,516.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.35; D 1.00; E 0.90; contributions 0.12, 0.21, 1.16, 0.60, 0.90; Altman Z-score 2.9900028; zone safe. |
| Reverse: Largest total liabilities (to the dollar) for the Z-score to STAY at or above 2.99 | step | $200,534: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $200,534.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.49; E 0.90; contributions 0.12, 0.21, 0.26, 1.50, 0.90; Altman Z-score 2.9900057; zone safe. |
| Reverse: Smallest sales (to the dollar) for the Z-score to REACH 2.99 | step | $1,796,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $1,796,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 1.80; contributions 0.12, 0.21, 0.26, 0.60, 1.80; Altman Z-score 2.99; zone grey. |
| Reverse: Largest total liabilities (to the dollar) for the Z-score to STAY at or above 1.81 | step | $949,367: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $949,367.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 0.53; E 0.90; contributions 0.12, 0.21, 0.26, 0.32, 0.90; Altman Z-score 1.81; zone grey. |
| Reverse: Smallest market value of equity (to the dollar) for the Z-score to REACH 2.99 | step | $1,246,667: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $1,246,667.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.49; E 0.90; contributions 0.12, 0.21, 0.26, 1.50, 0.90; Altman Z-score 2.9900004; zone safe. |
| Reverse: Smallest sales (to the dollar) for the Z-score to REACH 1.81 | step | $616,000: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $616,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.62; contributions 0.12, 0.21, 0.26, 0.60, 0.62; Altman Z-score 1.81; zone grey. |
| EBIT $40,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $40,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.04; D 1.00; E 0.90; contributions 0.12, 0.21, 0.13, 0.60, 0.90; Altman Z-score 1.9620000; zone grey. |
| EBIT $120,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $120,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.12; D 1.00; E 0.90; contributions 0.12, 0.21, 0.40, 0.60, 0.90; Altman Z-score 2.2260000; zone grey. |
| EBIT $200,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $200,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.20; D 1.00; E 0.90; contributions 0.12, 0.21, 0.66, 0.60, 0.90; Altman Z-score 2.49; zone grey. |
| EBIT $300,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $300,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.30; D 1.00; E 0.90; contributions 0.12, 0.21, 0.99, 0.60, 0.90; Altman Z-score 2.82; zone grey. |
| EBIT $400,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $400,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.40; D 1.00; E 0.90; contributions 0.12, 0.21, 1.32, 0.60, 0.90; Altman Z-score 3.15; zone safe. |
| Total liabilities $250,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $250,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 2.00; E 0.90; contributions 0.12, 0.21, 0.26, 1.20, 0.90; Altman Z-score 2.6940000; zone grey. |
| Total liabilities $1,000,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $1,000,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 0.50; E 0.90; contributions 0.12, 0.21, 0.26, 0.30, 0.90; Altman Z-score 1.7940000; zone distress. |
| Sales $500,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $500,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.50; contributions 0.12, 0.21, 0.26, 0.60, 0.50; Altman Z-score 1.6940000; zone distress. |
| Sales $1,500,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $1,500,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 1.50; contributions 0.12, 0.21, 0.26, 0.60, 1.50; Altman Z-score 2.6940000; zone grey. |
| Working capital $300,000 | same model | working capital $300,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.30; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.36, 0.21, 0.26, 0.60, 0.90; Altman Z-score 2.3340000; zone grey. |
| Working capital $0 | same model | working capital $0.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.00; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.00, 0.21, 0.26, 0.60, 0.90; Altman Z-score 1.9740000; zone grey. |
| Total assets $0 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $0.00; Altman Z-score undefined — every ratio divides by total assets. |
| Working capital −$50,000 | same model | working capital −$50,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A −0.05; B 0.15; C 0.08; D 1.00; E 0.90; contributions −0.06, 0.21, 0.26, 0.60, 0.90; Altman Z-score 1.9140000; zone grey. |
| EBIT −$100,000 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT −$100,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C −0.10; D 1.00; E 0.90; contributions 0.12, 0.21, −0.33, 0.60, 0.90; Altman Z-score 1.50; zone distress. |
| Fractional inputs | same model | working capital $123,456.78; retained earnings $234,567.89; EBIT $87,654.32; market value of equity $456,789.12; total liabilities $345,678.90; sales $987,654.32; total assets $1,234,567.89; A 0.10; B 0.19; C 0.07; D 1.32; E 0.80; contributions 0.12, 0.27, 0.23, 0.79, 0.80; Altman Z-score 2.2131556; zone grey. |
| EBIT $351,515 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $351,515.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.35; D 1.00; E 0.90; contributions 0.12, 0.21, 1.16, 0.60, 0.90; Altman Z-score 2.9899995; zone grey. |
| Sales $615,999 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $615,999.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.62; contributions 0.12, 0.21, 0.26, 0.60, 0.62; Altman Z-score 1.8099990; zone distress. |
| Total liabilities $0 | same model | working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $0.00; sales $900,000.00; total assets $1,000,000.00; Altman Z-score undefined — market value ÷ total liabilities. |
| All-zero numerators | same model | working capital $0.00; retained earnings $0.00; EBIT $0.00; market value of equity $0.00; total liabilities $500,000.00; sales $0.00; total assets $1,000,000.00; A 0.00; B 0.00; C 0.00; D 0.00; E 0.00; contributions 0.00, 0.00, 0.00, 0.00, 0.00; Altman Z-score 0.00; zone distress. |
Who uses this
- The lender screening a borrower: they learn $100,000 of working capital on $1,000,000 of assets gives a Z-score of 2.09 — grey, not safe — and they check the $351,516 reverse to see the EBIT a safe score needs.
- The investor checking a holding: they learn a Z-score below 1.81 means distress — and they check the $949,367 reverse to see the liabilities a 1.81 score allows.
- The supplier deciding on credit terms: they learn the five factors together separate healthy companies from distressed ones far better than any one ratio — and they check the $1,796,000 reverse to see the sales a safe score needs.
- The student learning distress prediction: they learn the Z-score is 1.2·A + 1.4·B + 3.3·C + 0.6·D + 1.0·E — and they check the $616,000 reverse to see the sales a 1.81 score needs.
Accuracy & limitations
The math is first-principles: the Altman Z-score is 1.2 times working capital over total assets, plus 1.4 times retained earnings over total assets, plus 3.3 times EBIT over total assets, plus 0.6 times market value of equity over total liabilities, plus 1.0 times sales over total assets — all in dollars, the Z-score displayed to two decimals half-up. The zones are STRICT: safe is a Z-score above 2.99, grey is 1.81 to 2.99, distress is below 1.81 — a Z-score of exactly 2.99 is grey, not safe, and a Z-score of exactly 1.81 is grey, not distress. At $0 total assets the Z-score is UNDEFINED (every ratio divides by total assets — division by zero) — the calculator shows “undefined” with a note, never a number, never hidden. At $0 total liabilities the Z-score is UNDEFINED (market value ÷ total liabilities — division by zero) — the calculator shows “undefined” with a note, never a number, never hidden. At −$50,000 working capital the Z-score is 1.91 (unrounded 1.9140000, grey) — negative working capital means current liabilities exceed current assets — the working-capital contribution goes negative and drags the score down — the calculator shows the 1.91 figure with a note, never hides it. At −$100,000 EBIT the Z-score is 1.50 (unrounded 1.5000000, distress) — negative EBIT means the company is losing money — the earnings contribution goes negative — the calculator shows the 1.50 figure with a note, never hides it. Negative inputs other than working capital and EBIT are clamped at 0 in the calculator — a negative retained earnings, market value, total liabilities, sales or total assets figure is not a real input, so the model treats it as zero and says so. What the model cannot do is judge the company: the Z-score says nothing about cash in the bank, fraud, management, or whether the market has already priced the trouble in — and it says nothing about private companies, which have no market value of equity and need a different Z-score variant. The model was built on public manufacturing companies in 1968 — service companies, banks and insurers have different balance sheets, so treat the score as a screen, not a verdict. A high Z-score is not a guarantee: a company can score safe and still fail if its cash runs out, and a distress score is not a sentence: a company can score below 1.81 and still recover if its earnings turn. Use it to see which companies need a closer look — then check the cash, the debts and the story before you lend or invest.
Cite this calculatorBright Side Kit. “Altman Z-Score Calculator: Is This Company in Danger?” brightoolbox.com, 2026. Method: Altman Z-score = 1.2·(working capital ÷ total assets) + 1.4·(retained earnings ÷ total assets) + 3.3·(EBIT ÷ total assets) + 0.6·(market value of equity ÷ total liabilities) + 1.0·(sales ÷ total assets); zones strict: safe above 2.99, grey 1.81–2.99, distress below 1.81. Reverses: smallest EBIT (to the dollar) for the Z-score to REACH 2.99 is $351,516 (at $351,516 the Z-score is 2.9900028 — safe; at $351,515 the Z-score is 2.9899995 — grey); largest total liabilities (to the dollar) for the Z-score to STAY at or above 2.99 is $200,534 (at $200,534 the Z-score is 2.9900057 — safe; at $200,535 the Z-score is 2.9899982 — grey); smallest sales (to the dollar) for the Z-score to REACH 2.99 is $1,796,000 (at $1,796,000 the Z-score is 2.9900000 — exactly on the line, grey; at $1,795,999 the Z-score is 2.9899990 — grey; at $1,796,001 the Z-score is 2.9900010 — safe); largest total liabilities (to the dollar) for the Z-score to STAY at or above 1.81 is $949,367 (at $949,367 the Z-score is 1.8100000 — exactly on the line, grey; at $949,368 the Z-score is 1.8099997 — distress); smallest market value of equity (to the dollar) for the Z-score to REACH 2.99 is $1,246,667 (at $1,246,667 the Z-score is 2.9900004 — safe; at $1,246,666 the Z-score is 2.9899992 — grey); smallest sales (to the dollar) for the Z-score to REACH 1.81 is $616,000 (at $616,000 the Z-score is 1.8100000 — exactly on the line, grey; at $615,999 the Z-score is 1.8099990 — distress). Defaults: working capital $100,000.00; retained earnings $150,000.00; EBIT $80,000.00; market value of equity $500,000.00; total liabilities $500,000.00; sales $900,000.00; total assets $1,000,000.00; A 0.10; B 0.15; C 0.08; D 1.00; E 0.90; contributions 0.12, 0.21, 0.26, 0.60, 0.90; Altman Z-score 2.09; zone grey Bright Side Kit. "Altman Z-Score Calculator: Is This Company in Danger?" https://brightoolbox.com/altman-z-score-calculator/ Accessed October 27, 2026.
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Frequently asked questions
What is the Altman Z-score?
A five-factor bankruptcy score from 1968. Z = 1.2·(WC/TA) + 1.4·(RE/TA) + 3.3·(EBIT/TA) + 0.6·(MVE/TL) + 1.0·(Sales/TA). On $100,000 of working capital, $150,000 of retained earnings, $80,000 of EBIT, $500,000 of market value of equity, $500,000 of total liabilities, $900,000 of sales and $1,000,000 of total assets the Z-score is 2.09 — grey.
How do I calculate the Altman Z-score?
Work out the five ratios, weight them, and add. A = $100,000 ÷ $1,000,000 = 0.10, B = $150,000 ÷ $1,000,000 = 0.15, C = $80,000 ÷ $1,000,000 = 0.08, D = $500,000 ÷ $500,000 = 1.00, E = $900,000 ÷ $1,000,000 = 0.90. Then 1.2 × 0.10 + 1.4 × 0.15 + 3.3 × 0.08 + 0.6 × 1.00 + 1.0 × 0.90 = 0.12 + 0.21 + 0.26 + 0.60 + 0.90 = 2.09.
What does a 2.09 Altman Z-score mean?
Grey zone — not safe, not distress. A Z-score of 2.09 sits between 1.81 and 2.99, so the five factors together do not clear the safe line — the company needs a closer look at earnings, sales and debts.
What is a safe Altman Z-score?
Above 2.99 — strictly. A Z-score of exactly 2.99 is grey, not safe: at $1,796,000 of sales the Z-score is 2.9900000 — exactly on the line — and one more dollar of sales, $1,796,001, gives 2.9900010 and is safe.
How much EBIT do I need for a safe score?
$351,516 at the same assets, debts and sales. The smallest EBIT for the Z-score to reach 2.99 is $351,516. At $351,515 the Z-score is 2.9899995 — it displays as 2.99 but is below the safe line.
What if total assets are zero?
The Z-score is undefined. At $0 total assets every ratio divides by total assets — division by zero — and the calculator shows “undefined” with a note, never a number. The same holds at $0 total liabilities, where market value ÷ total liabilities is undefined.
Can the Altman Z-score be negative?
Yes. Negative working capital or negative EBIT drag the score down: at −$50,000 of working capital the Z-score is 1.91, and at −$100,000 of EBIT it is 1.50 — distress — and the calculator shows the figures with notes, never hides them.
What is the difference between the Altman Z-score and the current ratio?
The current ratio is one ratio; the Z-score is five. The current ratio divides current assets by current liabilities — a liquidity snapshot. The Z-score combines working capital, retained earnings, EBIT, market value over liabilities and sales into one distress score.