Altman Z: The Long Lost Safety Statistic
There have been many bankruptcies during 2020, as the COVID-19 pandemic weakened companies including J. Crew, Hertz, 24 Hour Fitness, JCPenney, and dozens of others. These examples show how safety in investments is instrumental. In order to grow your money over a long period of time the companies where your money is placed must be financially sound. There are multiple statistics that attempt to predict the potential earning of a company, however, there are only a few that can confidently supply a prediction of safety and sustainability of a given business. One of the most useful statistics to measure safety is the Altman Z score, a composite number that combines liabilities, assets, earnings, and market value. These are the building blocks for most industrial businesses and give you a good idea of the risk of the business based on its profitability and the scale at which it works. The Altman Z score creates ratios that compare and contrast the multitude of statistics that show the ea