Altman Z-Score Screener: Predicting Corporate Solvency & Financial Distress [2026]
Date Published
1. The 1968 Multivariate Discriminant Model
How Edward Altman Revolutionized Credit Risk
Prior to Altman's work, financial statement analysis relied on single-ratio rules of thumb. Edward Altman applied Multivariate Discriminant Analysis (MDA) to formulate a composite score combining liquidity, cumulative profitability, operating efficiency, leverage, and asset turnover.
2. Altman Model Variants and Zone Thresholds
Manufacturing (Z) vs Non-Manufacturing / Service (Z'')
Below are the formulas and cutoffs for the classic and modernized Altman models.
Model Variant | Target Sector | Formula Specification | Safe Zone | Grey Zone | Distress Zone Original Z-Score | Public Manufacturing | 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.999X5 | > 2.99 | 1.81 – 2.99 | < 1.81 Revised Z'-Score | Private Manufacturing | 0.717X1 + 0.847X2 + 3.107X3 + 0.420X4 + 0.998X5 | > 2.90 | 1.23 – 2.90 | < 1.23 Modern Z''-Score | Tech / Non-Mfg / Service | 6.56X1 + 3.26X2 + 6.72X3 + 1.05X4 | > 2.60 | 1.10 – 2.60 | < 1.10
Was this article helpful?
Your feedback directly guides the research and strategies we publish next.