Fundamental: Altman Z-Score

$$Z = 1.2\frac{CA-CL}{TA} + 1.4\frac{RE}{TA} + 3.3\frac{EBIT}{TA} + 0.6\frac{MVE}{TL} + 1.0\frac{S}{TA}$$

The Altman Z-Score (Edward Altman, 1968) is the original bankruptcy-prediction model, combining five weighted financial ratios into a single distress score for publicly-traded manufacturers. It remains one of the most widely cited fundamental risk screens.

Term	Meaning
CA − CL	Working capital / Total Assets
RE	Retained Earnings / Total Assets
EBIT	Operating Earnings / Total Assets
MVE	Market Value of Equity / Total Liabilities
S	Revenue / Total Assets

---

Interpreting the Score

Z-Score	Zone
> 2.99	Safe — low bankruptcy risk
1.81 – 2.99	Grey zone — elevated uncertainty
< 1.81	Distress — high bankruptcy risk

Threshold the output with a LOGIC module to build alerts or filters around these zones.

---

Missing Data

If any of the eight inputs is missing (null) at a position, the Z-Score at that position is null.

The score is also undefined — and therefore null — when Total Assets ≤ 0 or Total Liabilities ≤ 0 (every term in the formula divides by one of the two). Negative Retained Earnings, negative EBIT, or negative Revenue are legitimate values and compute straight through — a company can have a real, negative-contribution Z-Score.

In live execution the module returns exactly one datapoint — the newest position — which is null when it cannot be determined.

---

Caveats

• EBIT proxy: this module wires EBIT from Stock: Income and Cash Flow (TTM) → opinc (Operating Income), a standard proxy for EBIT. It excludes non-operating items that a strict EBIT figure would include — expect small divergence from screener sites that use a different EBIT definition.
• TTM basis: ebit and revenue (market_value_equity is a point-in-time balance, not a flow) must be wired as trailing-twelve-month series to match Altman's annual-statement inputs — the EDGAR nodes already publish them on a TTM basis.

---

Wiring

From Stock: Balance Sheet (Quarter-End): ca → Current Assets, cl → Current Liabilities, ta → Total Assets, re → Retained Earnings, tl → Total Liabilities. From Stock: Income and Cash Flow (TTM): opinc → EBIT. Select the same company on every node — mixing issuers across nodes silently produces a nonsense score.

Build the remaining two with a Multiply module:

• Revenue = rps (revenue per share) × shr (shares outstanding)
• Market Value of Equity = closing price (e.g. an Alpaca Cryptocurrency/Stock close) × shr

---

Related Modules

• ALTZDP — Altman Z″-Score, for non-manufacturers and emerging markets
• PFS — Piotroski F-Score (fundamental quality)
• GRAHAM — Graham Number (fair-value benchmark)