Accounting Ratios

Altman Z-Score

The Altman Z-score is a formula designed in 1968 by Edward I. Altman to determine if a company is headed for bankruptcy. It takes into account profitability, leverage, liquidity, efficiency and solvency ratios. As advised by Altman in later literature, we have updated the Z-scores using bond market equivalent ratings. We have made additional enhancements to account for recent accounting changes that might distort the original thesis. Our analysis suggests that just 3.7% of listed companies globally with a market capitalisation exceeding US$1bn are in the "danger zone".

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