Calculating Z-Score

The z-score is a numerical measure that is used to predict bankruptcy. The z-score formula was created in the 1960s by Edward Altman, finance professor at the Stern School of Business, University of New York. The formula is mainly used to predict the likelihood that a company enters bankruptcy within two years. If the company z-score is greater than 3 is considered safe from bankruptcy. If the z-score between 2.7 and 2.99, the company is said to be "on alert" that is, if not improve the fortunes of the company during the coming years is likely bankruptcy. A score of between 1.8 and 2.7 suggests that it is a good chance the company will go bankrupt in the next two years, while a score below 1.8 means that bankruptcy is imminent.
Step 1: Remove the following financial metrics of the audited financial statements of the company's working capital (defined as current assets less current liabilities on the balance sheet of the company), earnings total assets (balance sheet), preserved (balance sheet), Earnings before interest and taxes (results), total liabilities (balance) and sales (results).
Step 2: Use Yahoo! Finance to determine the current market value of equity. Enter the stock symbol of the company in the search box and find a market capitalization of the company (which is the market value of equity) in the resulting Web page.
Step 3: Calculate the z-score according to the following formula: + 3.3T3 1.4T2 1.2T1 + + .6 + 999 t4 t5 in this formula, the coefficients correspond to the following metric: T1 = working capital / total assets T2 = retained earnings / total assets T3 = earnings before interest and taxes / total assets T4 = market value of equity sales T5 = total liabilities / total assets.