Equity / Risk Metric

Altman Z-Score

Definition

A formula used to predict the probability of a company going bankrupt within two years based on financial ratios.

Formula / Rules
Z = 1.2X₁ + 1.4X₂ + 3.3X₃ + 0.6X₄ + 1.0X₅
Example
Z-Score above 3.0 indicates low bankruptcy risk.
Related Terms
Current Ratio Debt-to-Equity Ratio Piotroski F-Score
Frequently Asked Question
What is the Altman Z-Score?
The Altman Z-Score predicts the probability of corporate bankruptcy within two years using five financial ratios. A score above 3.0 indicates financial safety; below 1.8 signals distress.
APA Citation
Clark, R. (2025). Altman Z-Score. VixShield Trading Glossary. Retrieved from https://www.vixshield.com/glossary/altman-z-score
RC
Russell Clark, FNP-C
Author of SPX Mastery series · Founder of VixShield
Last updated:  ·  Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.