The Altman Z-Score is a bankruptcy prediction calculation. While a low score does not mean you are going to file bankruptcy, it does indicate you are very likely to file bankruptcy in the next 24 months if you do not change the course of the company. The Z-Score measures the probability of insolvency (inability to pay debts as they become due).
- Distress Zone - indicates a very high probability of insolvency.
- Grey Zone - indicates possible insolvency.
- Safe Zone - indicates that insolvency is not likely. It also indicates you have a relatively healthy company.
This is a benchmark ratio. It is intended to be used to help companies make good decisions about the future of their company. Ignoring your score is not wise.
If you would like some help interpretting your Z-Score, please feel free to contact us.