# Calculator by linzhengnd

VIEWS: 5 PAGES: 2

• pg 1
```									                                                  SOFTWARE INC.
Z-SCORE CALCULATOR

INTRODUCTION

In the 1960's, Edward I. Altman developed the Bankruptcy Predictor Model, or Z-Score test.
The Z-Score Test lets you use statistical techniques to predict the likelihood of bankruptcy within the
next two years.

Dr. Altman's test was developed using 66 companies, 33 failed and 33 successful. The test achieved
an accuracy rate of 95%.

The financial ratios come directly from a company's financial statements.

Caution -- This prediction model is a tool for analysts, and is not meant to replace seasoned judgment.
It will help an analyst determine whether further review may be necessary, and can be calculated over a
number or years to determine whether the trend is downward -- if so, corrective action may enable the
company to survive.

METHODOLOGY

Input the information from the company's financial statements into the highlighted cells of the 'Calculator'
worksheet. The worksheet will calculate the Z-Score automatically.

Then, compare your results to the standards shown in the bottom section of the 'Calculator' worksheet.

WORKBOOK CONTENTS

The workbook includes two worksheets
Introduction
Calculator

File = 21860f3e-f442-47c4-99a4-c556d7a311ec.xls                                                          1:28 AM 9/5/2011
SOFTWARE INC.
Z-SCORE CALCULATOR

INPUTS

User -- complete highlighted fields

Income statement                        Net sales                                                                   100
Operating income (income before interest and tazes -- EBIT)                   5

Balance sheet                           Current assets                                                               75
Total assets                                                                125
Current liabilities                                                          60
Total liabilities                                                           100
Retained earnings                                                            15

Market value                            Market value of equity                                                      140

CALCULATION

Amount        Factor    Result
EBIT / Total assets                                                                        0.04           3.3     0.13
Net sales / Total assets                                                                    0.8        0.999      0.80
Market value of equity / Total liabilities                                                  1.4           0.6     0.84
Working capital / Total assets                                                             0.12           1.2     0.14
Retained earnings / Total assets                                                           0.12           1.4     0.17

RESULTS AND INTERPRETATION

Results                 Your company's Z-Score                                        2.08

Interpretation               Z-Score above 3.0                                         Company is financial sound

Z-Score between 2.7 and 2.99                              Company needs to exercise caution

Z-Score between 1.8 and 2.7                               Likely to go bankrupt within 2 years

Z-Score below 1.8                                         Likelihood of bankruptcy is very high

File = 21860f3e-f442-47c4-99a4-c556d7a311ec.xls                                                                            1:28 AM 9/5/2011

```
To top