Altman Z-score calculator

This API takes six balance-sheet and income figures — working capital, retained earnings, EBIT, equity, total assets and sales — and returns Edward Altman's 1968 discriminant score, the five underlying ratios, and the risk zone: safe above 2.99, grey between 1.81 and 2.99, and distress below 1.81. It is the same calculation analysts run in spreadsheets before a credit decision, done in one deterministic call with no data kept afterwards. The exact same code runs free in your browser on this page, so you can check a company by typing its figures and only pay when you automate the screening.

What the Z-score measures

In 1968 Edward Altman fitted a discriminant model on a sample of bankrupt and healthy manufacturers and found that five financial ratios, weighted together, separated the two groups with remarkable accuracy. The altman z-score calculator combines liquidity, accumulated profitability, operating efficiency, leverage and asset turnover into a single number. A company scoring above 2.99 sits in the safe zone, where failure within two years is statistically unlikely. A company below 1.81 falls into the distress zone, sharing its financial profile with firms that historically went bankrupt. Between the two cut-offs lies the grey zone, where the model cannot make a confident call and deeper analysis is required. The score is not a prediction with a date attached; it is a standardized distance from the profile of failed companies, and its strength is that it compresses a whole balance sheet review into one comparable figure.

How the five ratios are computed

The endpoint computes X1 as working capital over total assets, X2 as retained earnings over total assets, X3 as EBIT over total assets, X4 as equity over total liabilities, and X5 as sales over total assets. The score is 1.2 times X1, plus 1.4 times X2, plus 3.3 times X3, plus 0.6 times X4, plus 1.0 times X5, which reproduces Altman's original weights for publicly traded manufacturers. Working capital is current assets minus current liabilities, and equity should be the market value — share price times shares outstanding — though book value is an accepted fallback for unlisted firms. If you omit total liabilities, the API derives them as total assets minus equity, which is exact when you supply book equity. Total assets may not be zero, because every ratio is scaled by them; the call fails with an input error and is not charged. Every input is echoed back in the response alongside the rounded ratios, so the audit trail is complete.

Reading and using the result

Treat the score as a screening instrument, not a verdict. Lenders run it to triage credit applications: safe-zone files move forward, distress-zone files go to a senior underwriter. Investors track the score of portfolio companies quarter over quarter, because a falling trend matters more than a single reading — a firm sliding from 3.5 to 2.2 is telling you something even though it has not crossed a cut-off yet. Keep in mind the model's scope: it was calibrated on public manufacturers, so scores for banks, insurers or young service companies should be interpreted with care, since their balance-sheet structures differ systematically. The response includes the individual X-ratios precisely so you can see which component is driving the result — collapsing liquidity, shrinking retained earnings or weak asset turnover — and investigate the cause rather than the symptom.