Z Risk Ratio

Z risk ratio defined as:

Z = 0.012A + 0.014B + 0.033C+
0.006D + 0.010E

Let T= Total Asset
A= Net Current Asset / T
B= Retained Earning /T
C= Profit b4 interest before tax / T
D= Market Cap / T
E= Sales / T

Z < 1.8 => company bankrupt
Z > 3 => company healthy


Accuracy:
bankruptcy (3 years 95%) (2 yrs 70%)