Z Score

An early form of credit scoring developed in the US to predict company failure, the z-score was devised in 1968 by Edward Altman, a financial economics professor at the Leonard N. Stern School of Business at New York University. A set of five common financial ratios are combined in a weighted system to statistically asses the likelihood of a company going bankrupt within two years.

The score was originally developed for the manufacturing industry, but was then expanded to cover all business types. A pre-cursor the the credit scoring techniques today, the z score is now rarely used.

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