A company failure or bankruptcy prediction method developed by Professor Edward Altman of New York University. A company's Z score is a positive function of five factors:
(net working capital) / (total assets) (retained earnings) / (total assets) (EBIT) / (total assets) (market value of common and preferred) / (book value of debt) (sales) / (total assets).
Although the weights are not equal, the higher each ratio, the higher the Z score and the lower the probability of bankruptcy. Also called Zeta.
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