The meaning of the Z score Altman is the model to analyze the financial situations and the current scenario of the market. It is a predictive model that was formed by Edward Altman. The purpose of this model is to combine all the different five financial ratios which are used to find the possibility of bankruptcy in various companies.
In normal speaking terms i.e. in layman language, the more lower the score, higher the chances and probability of bankruptcy. The Z-Scores which is above 3 makes a company to be considered as healthy and hence is very much unlikely to become bankrupt in the near future. The Z-Scores that lie between 0.6 and 3 comes under grey area.
The z–score Altman model is not the exact model but is relatively an accurate mode which clearly constitutes all the real world applications. The Z-Score Altman model has successfully guessed and predicted 63% bankrupt companies in less than two years. The z-score Altman model measures financial strength of a company and is dependent on the weighted sum of various factors. The Altman Z-score is sometimes also referred as z-score. Although the various financial strength measures come under Z-score Altman. Also the Z-score has many multiple factors, and has successfully predicted about the various bankrupt companies in the past.
The most important thing is that the z-score Altman is also recently included in the spreadsheets issued by the government related to the analysis of financial statement ratio. This analysis of this financial statement ratio spreadsheets give the formulas, calculation, definitions, methods, charts.
It was in 1968 when the Z-score Altman formula first predicted bankrupt companies. It was published by Mr. Edward I. Altman, who was working as an Assistant Professor at that time in Finance. The z-score formula can be used to predict whether a company will go to the bankrupt state or not I the coming next 2 years.