Predicting financial distress of companies: revisiting the Z-Score and ZETA® models

This paper is adapted and updated from E. Altman, "Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy," Journal of Finance, September 1968; and E. Altman, R. Haldeman and P. Narayanan, "Zeta Analysis: A New Model to Identify Bankruptcy Risk of Corporations," Journal of Banking & Finance, 1, 1977. Predicting Financial Distress of Companies: Revisiting the Z-Score and ZETA Models Background This paper discusses two of the venerable models for assessing the distress of industrial corporations. These are the so-called Z-Score model (1968) and ZETA 1977) credit risk model. Both models are still being used by practitioners throughout the…