Altman Z-Score
Short definition
The Altman Z-score squeezes a few balance-sheet and profit ratios into one bankruptcy index. It is a screen; it is not a universal threshold under Turkish cash and inflation accounting.
Detailed explanation
The original formula is a US manufacturing sample. Private, services and inflation-distorted books have variants; copying the weights misleads.
The score does not see the cash calendar or the maturity wall. A low Z is a flag for DD and stress, not a credit decision.
Why it matters for the CFO
If the board hangs on one score, covenants and the 13-week are ignored. Conversely, a falling Z can be an early warning.
How it is calculated
Z ≈ 1,2X₁ + 1,4X₂ + 3,3X₃ + 0,6X₄ + 0,999X₅ (orijinal imalat formülü; katsayılar örnekleme bağlıdır)
The weights are a historical discriminant. Your sector and IFRS 16 can invalidate them.
Variables in the formula
- X₁: NWC / assets
- X₃: EBIT / assets
- X₄: market equity / book debt
How to read it
Thresholds belong to the original sample; there is no universal “safe Z”. Inflation breaks the denominators.
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Definitions are educational. They are not investment, credit or tax advice.