Altman Z-Score Case Study in Detail

The Altman Z-score is the output of a credit-strength test that gauges a publicly traded manufacturing company’s likelihood of bankruptcy. The Altman Z-score is based on five financial ratios that can calculate from data found on a company’s annual 10-K report. It uses profitability, leverage, liquidity, solvency, and activity to predict whether a company has a high probability of being insolvent.

CAIIB ABM - Advanced Bank Management Syllabus Priority
Check Here
Bank Financial Management - BFM Syllabus Priority
Check Here
110+ CAIIB Case Study Videos
Check here
ABM BFM Retail Previous Year Questions
Get Tests Here
Full Course Videos in Hindi English
Check Here

Get CAIIB Full Video Course

Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E


A = working capital / total assets

B = retained earnings / total assets

C = earnings before interest and tax / total assets

D = market value of equity / total liabilities

E = sales / total assets

A score below 1.8 means it’s likely the company is headed for bankruptcy, while companies with scores above 3 are not likely to go bankrupt. Investors can use Altman Z-scores to determine whether they should buy or sell a stock if they’re concerned about the company’s underlying financial strength. Investors may consider purchasing a stock if its Altman Z-Score value is closer to 3 and selling or shorting a stock if the value is closer to 1.8.

Q: Calculate Altman Z-Score for firm XYZ and State insolvency Probability of Firm:

EBIT: ₹500000,  Total Assets: 2000000

Total Liabilities: 1000000,  Retained Earnings: 1000000

Market Value of Equity: 3000000,   Working Capital: 500000

Solution: Solved in above Video with the description


Also Like:


Please enter your comment!
Please enter your name here

Learning Sessions
Btech, JAIIB CAIIB and a tutor. Have taken more than 900+ hours online classes with more than 1,25,000 students



IOB UCO Bank Promotion Exams Free Study Material

Promotion exam for Indian Overseas Bank has already been announced. So it is high time for preparing for promotion Exam. Clearing promotion exam for...

Free Mock Test for Bank Promotion Exams All Banks and All Scales

For promotion in Public Sector Banks, written tests are conducted by IIBF, which are basically computer based objective type tests. The syllabus for the...

Protection to Collecting Banker – Bank Promotion JAIIB

Collecting Banker is the one who accumulates the proceeds of a cheque for the customer. Even though a banker gathers the proceeds of a...

ABM Paper 1 CAIIB Correlation and Regression

Correlation – Regression : Regression and correlation analyses show us how to determine both the nature and strength of the relationship between the two...