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Altman Z-Score (distress risk)
A published formula that estimates how likely a company is to run into serious financial trouble in the next couple of years. It weighs up working capital, accumulated profits, operating earnings and how much of the business is funded by owners rather than borrowings.
Example
Above 5.85 is the "safe" band, 4.35 to 5.85 is grey, below 4.35 signals distress. A company sitting on a large cash pile can score safe even while losing money — it is unlikely to go bust soon.
Worth knowing
This measures survival odds, NOT quality or value, and our version is approximate because two inputs are estimated from available data — which nudges the score upward. Not advice.