Then set up a last cell to add each of the formula cells together. That is 1.2(working capital/total assets), 1.4(retained earnings/total assets), 3.3(earnings before interest and taxes (EBIT)/total assets), 0.6(market value of equity/book value of total liabilities), and 1.0(sales/total assets). ![]() Then set up a cell for each of the variable formulas, remembering to link to the data entry cell for each. In Excel, the simplest way to set up the Altman Z-score is to set up a cell for each of the variables. Online calculators can help you calculate Z-scores - all you have to do is plug in the numbers. If this is starting to sound too complicated, fear not, the Internet is here to help. Total assets: This refers to a company’s combined assets (such as receivables, investments, etc.). Sales: This is the dollar value of a company’s total sales in a given period of time. Market value of equity: This is the total dollar value of a company’s equity (aka market capitalization ).īook value of total liabilities: This is the total dollar value of a company’s liabilities recorded in its financial statements (aka accounting “books”), including its debts and obligations. Retained earnings: This is the amount of net income a company has left after paying out dividends to its shareholders.Įarnings before interest and taxes (EBIT): This is how much a company made in profits before paying for interest and taxes. ![]() Working capital: This is the value that remains after subtracting a company’s current liabilities from its current assets. Here are the ingredients you’ll need to calculate an Altman Z-score, and what each one means: You can usually find them in a company’s balance sheet or income statement. Think of the ingredients as figures reflecting a company’s assets and costs. The Altman Z-score may look complicated, but it’s pretty simple to calculate if you have the necessary ingredients on hand.
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