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Z-Score Model

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Description

Developed by Edward Altman, this model uses multiple corporate income and balance sheet values to predict the likelihood of a company going bankrupt.

The Z-Score Model, also known as Altman’s Z-Score, is a predictive model developed by Edward Altman to forecast the likelihood of a company’s bankruptcy within two years. It uses a combination of five financial ratios derived from a company’s balance sheet and income statement. A lower score indicates a higher risk of bankruptcy, making it a valuable tool for credit and investment analysis.

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