Altman’s Z score variables description
| Variables | Description |
|---|---|
| X1 = Working Capital/Total Assets (WCTA) | It assesses the liquidity status of a company |
| X2 = Retained Earnings/Total Assets (RETA) | It evaluates the overall profitability and leverage of a company over a period of time |
| X3 = Earnings before Interest and Taxes/Total Assets (EBITTA) | It measures the firm’s asset productivity |
| X4 = Market Value of Equity/Book Value of Total Liabilities (MVBTL) | It measures a company’s assets’ relative worth and overall liabilities |
| X5 = Sales/Total Assets (SalesTA) | It measures the earning capacity of a firm to total assets |
| Z = overall index | The lower the Z score, the higher the risk of financial distress |
| Variables | Description |
|---|---|
| X1 = Working Capital/Total Assets (WCTA) | It assesses the liquidity status of a company |
| X2 = Retained Earnings/Total Assets (RETA) | It evaluates the overall profitability and leverage of a company over a period of time |
| X3 = Earnings before Interest and Taxes/Total Assets (EBITTA) | It measures the firm’s asset productivity |
| X4 = Market Value of Equity/Book Value of Total Liabilities (MVBTL) | It measures a company’s assets’ relative worth and overall liabilities |
| X5 = Sales/Total Assets (SalesTA) | It measures the earning capacity of a firm to total assets |
| Z = overall index | The lower the Z score, the higher the risk of financial distress |
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