Calculate Z-score?
Calculate Z-score?
Calculate Your Own Z-Score
Your Z-Score made easy
If your company is a privately owned manufacturing, trade, retail, wholesale, distribution, construction, or business-to- business service company, view the Z-Score calculator A.
If your company is a privately owned professional association such as physicians, dentists, insurance, mortgage, law, engineering, or architects, view the Z-Score calculator B.
Download also this document. The publicly held companies stated hereafter, with enormous resources at their disposal, could read the writing on the wall but for whatever reason couldn't, or wouldn't, take action in time to avert disaster.
In July, 2002, telecommunications giant Worldcom filed for Chapter 11 bankruptcy protection; 19 months earlier, Worldcom's Z-score was 1.5, well below the 1.8 threshold for distress for publicly held companies.
In 1977, International Harvester was coasting at a comfortable 3.5 (but only .5 above the "safe score" of 3 for publicly held companies), when Archie McCardell came on board to "save the company". McCardell's changes brought the company record profits and sales in 1979, but their Z-score for that year nosedived to the distress level of 1.1, showing its vulnerability to unforeseen events. A strike of record duration surprised Harvester in late 1979 and eviscerated the company's gains. By mid 1981, they were in Chapter 11 restructuring with a Z-score of minus 0.5.
And the Winner of the DVD War is...
Observe online giant Netflix vs bricks-&-mortar Blockbuster. In 1999, Netflix took a big bite out of Blockbuster's business with their one-price subscription and relaxed return policy. But in 2006, Blockbuster bit back with a cheaper online subscription that included in-store exchange.
Z-scores for both companies for 2006 revealed that neither had the chops to carry on at the current rate. Probability is against Netflix, but Blockbuster can't afford to slip up.
2006 Z-Score Netflix: 1.0: Clear in the Red Zone, with 80% probability of insolvency within 24 months. They changed their business model, by going to streamimg video, and low cost disc kiosks, known as the red-box. They survived!
2006 Z-Score Blockbuster: 2.1: In the Warning Zone, but bordering the Red Zone (1.8) - They did not change their VHS rental business model, and went out of business.
Other Sources of Information about the Z-Score:
Wikipedia
Edward I. Altman's paper at NYU