The value of the altman index points to. Calculation of the creditworthiness index (Altman's z-score). Altman model and credit rating

How to make a creditworthiness assessment based on financial reporting companies? William Beaver compared the financial ratios of 79 failing firms with those of 79 surviving firms. Failed firms had more debt, lower profitability, less free cash, and more accounts receivable.

As a result, they had a lower current ratio and a significantly lower absolute liquidity. Surprisingly, these firms had less inventory.

This approach was developed in the works of Edward Altman. The statements of many companies were analyzed, some of which went bankrupt. Altman was looking for a certain formula, depending on the indicators of the reporting of enterprises, by which it is possible to distinguish between bankrupt and non-bankrupt enterprises. Statistical methods based on information stock market The USA was defined in 1968. The Z-factor (Z-score), calculated by the formula:

Z= 1.2X 1 + 1.4X 2 + 3.3X 3 + 0.6X 4 + 1X 5,

• X 1 - own working capital / total assets;
• X 2 - retained earnings/amount of assets;
• X 3 - operating income (profit before interest and taxes) / total assets;
• X4- market price shares/debt;
• X 5 - revenue / total assets.

It was found that with Z 3) the enterprise is most likely in a prosperous zone and is far from bankruptcy.

Prior to 1965, 97% of non-bankrupt firms were above the threshold. Altman's model quite well predicted the bankruptcy of companies for 2 years and with an accuracy of 70% - for 5 years. We emphasize the probabilistic (statistical) nature of the conclusions on the Z-coefficient, for an individual enterprise, this conclusion may be incorrect.

Z = 0.717X 1 + 0.847X 2 + 3.107X 3 + 0.42X 4 + 0.995X 5,

• X 4 - book value of shares/debt.

The "threshold" value of the Z-coefficient for "bankrupt" companies is 1.23, for "prosperous" - 3.

Was also received formula for non-manufacturing companies:

Z = 6.56X 1 + 3.26X 2 + 6.72X 3 + 1.05X 4,

• X 4 - book value of shares / debt.

The "threshold" value of the Z-coefficient for "bankrupt" companies in the non-manufacturing sector is 1.1, for "prosperous" - 2.6. Note that there is no indicator X 5 - revenue / amount of assets.

In 1972, Roman Lis received UK formula:

Z = 0.063X 1 , + 0.057X 2 + 0.092X 3 + 0.001X 4,

• X 4 - equity / borrowed capital.

The "threshold" value of the Z-coefficient for "bankrupt" companies is 0.037.

The formula that works for Russia is difficult to determine. Most likely, it is currently impossible, since bankruptcy procedures are often determined by non-economic factors. But the practice of using Altman Z-coefficients at some Russian enterprises confirms the possibility of determining the trend of change financial condition, i.e., with the deterioration of the financial condition, the Z-coefficient worsened, and vice versa.

Altman model gives an estimate of the probability of bankruptcy according to the balance sheet and income statement.

Based on the value of the Z-score, it is possible to characterize the state of the company as safe, uncertain (gray zone) and dangerous. There are several calculation formulas for different models(Z-scores) Altman. For each model, Altman offers his own zone boundaries.

Here are the calculation formulas for the three most commonly used Altman models:

• Five factor model for companies whose shares are quoted on the exchange
• Five factor model for companies whose shares not listed on the exchange
• Four-factor model for companies on emerging markets.

The formulas are based on Altman's presentation "Corporate Credit Scoring Models." Dr. Edward I. Altman, Stern School of Business, New York University

style="center">

In addition to the Altman models, there are others.

General view of the Altman Model

Z = N1*X1 + N2*X2 + N3*X3 + N4*X4 + N5*X5
where
Ni is a numerical factor
Xi is a factor calculated according to the balance sheet and income statement

The models differ in multipliers at factors Xi and zone boundaries.

Factors Xi for all models are calculated using the same formulas with one exception. When calculating X4 for companies whose shares are listed on the exchange, the market value is taken, and for companies whose shares are not listed on the exchange, the amount of equity from the balance sheet is taken.

Five-factor Altman model
for companies whose shares are listed on the stock exchange

Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 0.999*X5

Zone boundaries:

Four-factor Altman model
for companies in emerging markets

Z'' = 6.56*X1 + 3.26*X2 + 6.72*X3 + 1.05*X4

As Altman himself said in his interview (February 2016) The Altman Z-Score in Edward Altman's Own Words, he developed this model in the mid-90s on the basis of manufacturing (manufacturers and non-manufacturers) companies from Mexico, Brazil and Argentina.

Zone boundaries:

Formulas for calculating factors Xi in the Altman model

The calculation formula using the data of the lines of the Russian balance sheet and income statement is highlighted in yellow

X1= [Working Capital] / Assets
where
[Working capital] = [Working capital] assets] - [Short term obligations]
X1 = (1250 + 1240) / 1600

X2= [Net profit] / Assets
X2 = 2400 / 1600

X3= [Earnings before taxes and interest] / Assets
X3 = (2300 + 2330) / 1600

X4= [Market value of shares] / [Liabilities], to calculate Z
X4 = [Equity] / [Obligations], to calculate Z’ and Z’’
X4 = [Market value of shares] / (1400+1500), for Z
X4 = 1300 / (1400+1500) , for Z’ and Z’’

X5= Revenue / Assets
X5 = 2110 / 1600

It can be assumed that for Russian enterprises it is more suitable four-factor Altman model for companies in emerging markets.

Altman coefficient (creditworthiness index). This method was proposed in 1968 by a well-known Western economist, Altman (Edward I. Altman). The creditworthiness index is built using the apparatus of multiplicative discriminant analysis (Multiple-discriminant analysis - MDA) and allows, as a first approximation, to divide business entities into potential bankrupts and non-bankrupts.

In constructing the index, Altman examined 66 businesses, half of which went bankrupt between 1946 and 1965 and half were successful, and examined 22 analytical coefficients that could be useful in predicting possible bankruptcy. From these indicators, he selected the five most significant and built a multifactorial regression equation. Thus, the Altman index is a function of some indicators characterizing the economic potential of the enterprise and the results of its work over the past period. AT general view creditworthiness index (Z-score) looks like:

Z \u003d 1.3 X1 + 1.4 X2 + 3.3 X3 + 0.6 X4 + 1.0X5 (1)

Where Х1 – working capital/amount of assets;

Х2 – retained earnings/amount of assets;

X3 - operating profit / total assets;

Х4 – market value of shares/debt;

Х5 – revenue/amount of assets.

The results of numerous calculations according to the Altman model showed that the generalizing indicator Z can take values ​​within [-14, +22], while enterprises for which Z> 2.99 are financially stable, enterprises for which Z<1,81 являются безусловно-несостоятельными, а интервал составляет зону неопределенности.

Table 1

The degree of probability of bankruptcy according to E. Altman

The Z-factor has a common serious drawback - in fact, it can only be used in relation to large campaigns that list their shares on exchanges. It is for such companies that you can get an objective market assessment of equity capital.

Practice shows high accuracy of bankruptcy estimates and forecasts using a z-score for large and medium-sized companies.

In 1983, Altman received a modified version of his formula for companies whose shares were not listed on the exchange:

Z = 0.717X1 + 0.847X2 + 3.107X3 + 0.42X4 + 0.995X5 (2)

(here X4 is the book value, not the market value of the shares). The "borderline" value here is 1.23.

The Altman coefficient is one of the most common. However, a careful study of it shows that it was compiled incorrectly: term X1 is associated with a management crisis, X4 characterizes the onset of a financial crisis, while the rest are economic. From the point of view of a systematic approach, this indicator has no right to exist.

In general, according to this formula, enterprises with profitability above a certain limit become completely "unsinkable". In Russian conditions, the profitability of an individual enterprise is largely exposed to the danger of external fluctuations. Apparently, this formula in our conditions should have less high parameters with different profitability indicators.

Other similar criteria are known. So the British scientist Taffler (Taffler) proposed in 1977 four-factor predictive model, which was developed using the following approach:

When using computer technology, at the first stage, 80 relations are calculated according to the data of bankrupt and solvent companies. Then, using a statistical technique known as multivariate discriminant analysis, a solvency model can be built by identifying partial ratios that best distinguish the two groups of companies and their ratios. This selective ratio calculation is typical for determining some of the key dimensions of a corporation's performance, such as profitability, working capital matching, financial risk, and liquidity. By combining these measures and bringing them together appropriately, the solvency model produces an accurate picture of a corporation's financial health. A typical model for analyzing listed companies takes the form:

Z = 0.53X1 + 0.13X2 + 0.18X3 + 0.16X4 (3)

х1=earnings before taxes/current liabilities;

х2=current assets/total liabilities;

х3=current liabilities/total assets;

х4=revenue / amount of assets.

If the value of the Z-score is greater than 0.3, this indicates that the company has good long-term prospects, if it is less than 0.2, then bankruptcy is more than likely.

In Russia, the system of criteria for determining the structure of the balance sheet of enterprises as unsatisfactory was approved by Decree of the Government of the Russian Federation of June 20, 1994 N "498" On some measures to implement the legislation on the insolvency (bankruptcy) of enterprises, adopted in pursuance of the Decree of the President of the Russian Federation of December 22, 1993. No. 2264 "On measures to implement legislative acts on the insolvency (bankruptcy) of enterprises." Based on the norms of civil law, the most important features of a legal entity are the presence of separate property and its independent property liability. Any enterprise, being a legal entity, is responsible for the results of economic activity with all its property.

Federal Law "On Insolvency (Bankruptcy)" N 6-FZ dated January 8, 1998. establishes for all legal entities engaged in entrepreneurial activity, uniform grounds for declaring them insolvent (bankrupt), as well as a uniform procedure for the liquidation of such legal entities. Thus, the legislation does not provide for any exceptions regarding liability for the obligations of enterprises in various industries and areas of economic activity, and it is this approach that was implemented in the above-mentioned Decree of the Government of the Russian Federation.

It should be especially noted that the recognition of an enterprise as insolvent and having an unsatisfactory balance sheet structure does not mean that the enterprise is recognized as insolvent (bankrupt), does not change the legal status of the enterprise and does not lead to civil liability. This is only a state of financial instability of the enterprise recorded by the body authorized by the owner of the property, and such actions do not go beyond the powers of the owner of the enterprise to exercise control over the effective use of their property. Therefore, the normative values ​​of the system of criteria are set in such a way as to ensure timely control over the financial condition of the enterprise and the implementation of measures to prevent insolvency, stimulating enterprises to independently overcome the crisis.

To assess the creditworthiness of an enterprise, its economic potential and the quality of financial results, the Altman creditworthiness index can be used. It is formed on the basis of an analysis of the activities of industrial enterprises, half of which between 1946 and 1965. went bankrupt, while the other half worked successfully. The main partial criteria in this index are the following relative indicators.

The ratio of earnings before interest and taxes (EBIT) to the value of assets (AK):

The value of K1 shows how many rubles of profit before tax and financial expenses associated with the payment of interest on credit resources account for one ruble of assets. The growth of this indicator in dynamics is a positive factor, indicating an increase in the level of economic and financial activities of the enterprise.

The ratio of sales revenue (B) to the value of assets (AK):

The value of K2 shows how many rubles of revenue account for one ruble of the value of assets, the speed with which the funds invested in assets are again converted into cash. The growth of this indicator in dynamics is a positive factor, indicating an increase in the level of business activity of the organization.

The ratio of the market value of equity (RSCK) to the attracted capital at book value (AR):

The value of KZ shows how many rubles of equity account for one ruble of borrowed funds attracted to finance activities. The growth of this indicator in dynamics is a positive factor, indicating an improvement in the financial structure of the organization, a decrease in dependence on external investors.

The ratio of retained earnings (NPR) to the value of assets (AK):

The value of the K4 indicator characterizes the level of economic profitability of assets, shows how many rubles of net profit fall on one ruble of assets. The growth of this indicator in dynamics is a positive factor, indicating an increase in the level of management of the organization's financial and economic activities, and potential opportunities for expanding production.

The ratio of net working capital (working capital) to the value of assets (AK):

The value of K5 shows how many rubles of working capital account for one ruble of assets. The growth of this indicator in dynamics is a positive factor, indicating an increase in the level of coverage of assets with own funds necessary to finance current activities.

Based on these partial criteria, a creditworthiness index was formed, which looks like:

where /?1, R2, R3, RA, R5 - weight coefficients characterizing the significance of each particular criterion. Their values ​​are respectively equal to 3.3; 1.0; 0.6; 1.4; 1.2.

Given these values, the five-factor model has the form:

Altman singled out a numerical interval, which he called the "zone of uncertainty". If the calculated value Z k less than 1.81, then the company can be classified as a potential bankrupt if the value Z k more than 2.99, the company is not bankrupt, its creditworthiness is high.

Using this model, it is quite simple to estimate the level of bankruptcy of an enterprise. The use of the Altman creditworthiness index for Russian companies is possible with very large reservations, since the model is built on the basis of the specifics of organizing a business in another country; the tendencies of change for the period 1946-1965 were taken into account, and over the past years the economic situation has changed qualitatively. This model can be used to assess the creditworthiness of large companies whose shares are listed on stock exchanges, which will allow an objective assessment of the market value of equity capital.

Consider this model to assess the creditworthiness of the analyzed enterprise. The initial data and calculation results are presented in Table. 15.8.

Table 15.8

Dynamics of indicators characterizing the level of creditworthiness of an organization (Altman creditworthiness index)

Both values ​​of the integral indicator of creditworthiness Z k significantly more than the critical value of 2.99, which indicates that the level of creditworthiness of the enterprise is quite high, therefore, the likelihood of a credit risk for an investor is minimal. The value of the integral indicator of the creditworthiness of the enterprise Z k in the base period increased by 1.14%. The increase in the level of creditworthiness is associated with an increase in the return on assets in terms of profit before taxes and financial costs by 20.84%, the return on assets in terms of net profit - by 16.87%, an increase in the market value of the enterprise attributable to one ruble of borrowed funds. The level of creditworthiness was negatively affected by a decrease in the level of use of assets in the main activities by 15.51%, the share of working working capital in the assets of the enterprise - by 101.94%, therefore, when evaluating a business, special attention should be paid to factors affecting the decrease in these particular creditworthiness criteria enterprises.

This method was proposed in 1968 by a well-known Western economist, Altman (Edward I. Altman). The creditworthiness index is built using the apparatus of multiplicative discriminant analysis (Multiple-discriminant analysis - MDA) and allows, as a first approximation, to divide business entities into potential bankrupts and non-bankrupts.

In constructing the index, Altman examined 66 businesses, half of which went bankrupt between 1946 and 1965 and half were successful, and examined 22 analytical coefficients that could be useful in predicting possible bankruptcy. From these indicators, he selected the five most significant and built a multifactorial regression equation. Thus, the Altman index is a function of some indicators characterizing the economic potential of the enterprise and the results of its work over the past period. In general terms, the creditworthiness index (Z-score) looks like:

Х1 - working capital/amount of assets;
X2 - retained earnings/amount of assets;
X3 - operating profit/amount of assets;
X4 - market value of shares/debt;
Х5 - revenue/amount of assets.

The results of numerous calculations according to the Altman model showed that the generalizing indicator Z can take values ​​within [-14, +22], while enterprises for which Z> 2.99 are financially stable, enterprises for which Z<1,81 являются безусловно-несостоятельными, а интервал составляет зону неопределенности.

The Z-factor has a common serious drawback - in fact, it can only be used in relation to large campaigns that list their shares on exchanges. It is for such companies that you can get an objective market assessment of equity capital.

In 1983, Altman received a modified version of his formula for companies whose shares were not listed on the exchange:

(here X4 is the book value, not the market value of the shares.)

The Altman coefficient is one of the most common. However, a careful study of it shows that it was compiled incorrectly: the X1 term is associated with a management crisis, X4 characterizes the onset of a financial crisis, while the rest - an economic one. From the point of view of a systematic approach, this indicator has no right to exist.

In general, according to this formula, enterprises with profitability above a certain limit become completely "unsinkable". In Russian conditions, the profitability of an individual enterprise is largely exposed to the danger of external fluctuations. Apparently, this formula in our conditions should have less high parameters with different profitability indicators.