How to Calculate the Altman Z-Score: A Step-by-Step Guide Using Balance Sheet Data
To calculate the Altman Z-Score, start by gathering data like total assets, working capital, and EBIT from a company’s balance sheet and income statement. Next, compute five ratios – such as working capital over total assets – and plug them into the formula (see formula here). Finally, a score above 3 means safe, while below 1.8 signals risk, as seen in Tata Steel’s grey zone example (see the steps here)
