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Z-Score

What is a 'Z-Score'

A Z-score is a numerical measurement of a value's relationship to the mean in a group of values. If a Z-score is 0, it represents the score is identical to the mean score.

Explaining 'Z-Score'

Z-scores also reveal to statisticians and traders if a score is typical for a specified data set or if it is atypical. In addition to this, Z-scores also make it possible for analysts to adapt scores from various data sets to make scores that can be compared to one another accurately. Usability testing is one example of a real-life application of Z-scores.

The Altman Z-Score Formula

The Altman Z-score is the output of a credit-strength test that helps gauge the likelihood of bankruptcy for a publicly traded manufacturing company. The Z-score is based on five key financial ratios that can be found and calculated from a company's annual 10K report. The calculation used to determine the Altman Z-score is as follows:

Altman Z-Score Plus

Altman developed and released the Altman Z-Score Plus in 2012. This formula is used to evaluate both public and private companies and can be used for non-manufacturing companies as well as manufacturing companies. The Z-Score Plus is suitable for companies in the United States as well as companies outside of the United States.


Further Reading


Predicting financial distress of companies: revisiting the Z-score and ZETA® models
www.elgaronline.com [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …

Z-score models' application to Italian companies subject to extraordinary administrationZ-score models' application to Italian companies subject to extraordinary administration
papers.ssrn.com [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …

Financial Distress Prediction in an International Context: A Review and Empirical Analysis of Altman's Financial Distress Prediction in an International Context: A Review and Empirical Analysis of Altman's
onlinelibrary.wiley.com [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …

The portability of Altman's Z-score model to predicting corporate financial distress of Slovak companiesThe portability of Altman's Z-score model to predicting corporate financial distress of Slovak companies
www.tandfonline.com [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …

Applying Z-score model to distinguish insolvent construction companies in ChinaApplying Z-score model to distinguish insolvent construction companies in China
www.sciencedirect.com [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …

Understanding financial distress among listed firms in Nairobi stock exchange: A quantitative approach using the Z-score multi-discriminant financial analysis modelUnderstanding financial distress among listed firms in Nairobi stock exchange: A quantitative approach using the Z-score multi-discriminant financial analysis model
ir.jkuat.ac.ke [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …

Bank insolvency risk and different approaches to aggregate Bank insolvency risk and different approaches to aggregate
www.tandfonline.com [PDF]
… 438 Handbook of research methods and applications in empirical finance … Group 1) or by their similarity to Group 1 in all aspects except their economic well- being … sample of firms that have encountered earn- ings problems and then to observe the Z- Score's classification results …



Q&A About Z-Score


When was the first time that this formula was used ?

The first time that this formula was used was in 212 .

Where did this formula originate from ?

This formula originated from United States .

What does Z-scores allow analysts to do?

Z-scores help statisticians and traders determine if scores are typical for specified data sets.

What does Z-scores make possible for analysts?

It makes possible for analysts to adapt scores from various data sets so that they can be compared accurately.

Who released the Altman z Score Plus formula ?

Edward I Altman released this formula in 2012 .

What is a Z-score?

A Z-score is a numerical measurement of a value's relationship to the mean in a group of values.

Who developed the Altman z Score formula ?

Edward I Altman developed this formula in 1968 .

How can you tell if a score is typical or atypical?

If the score is , it represents that it is identical to the mean score.

Is there an example of real life application of Z-Scores?

Yes, usability testing is one example of real life application of Z-Scores.

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