Altman Z-Score Formula – Screening For Bankruptcy Risk
As value investors, one of our most important rules is to avoid incurring large losses. There are two easy ways to subject yourself to possible large losses; buy stocks for more than they’re worth, and buy stocks of companies that go bankrupt. The Altman Z-Score is a formula of 5 basic financial ratios to help determine the financial health of a company. In particular, it is a probabilistic model to screen for bankruptcy risk of a company.
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As founder of the Arbor Investment Planner my passion is to educate and empower the individual investors to manage their own investment portfolio.
The Arbor Investment Planner is a value investment portfolio management guide for those individual investors who choose to manage their own money. I focus on ideas and concepts important to the self directed investor; but put special emphasis on risk management, value investing strategies, and proper asset allocation and diversification.
- Ken Faulkenberry