Whole rating is made of 5 explanatory variable. If a company can follow these five it is probable it may increase it chance to get credit in bank, as the rating would improve.
X1 = ( Current assets - Current liabilities ) / total assets
X2 = Retained earnings / Total assets
X3 = EBIT / Total assets
X4 = Market value of equity / Book value of liability
X5 = Sales / Total assets
than Z-score for listed manufacturing companies = 1.2 * X1 + 1.4 * X2 + 3.3 * X3 + 0.6 * X4 + 0.999 X5
Z> 2,99 ...... good (AA-BBB) Z < 1,81 ..... bad (CCC-C)
- AAA (2004 - 2005 = 5.31; 1996 - 2001 = 5.60; 1992 - 1995 = 4.80)
- AA (4.99; 4.73; 4.15)
- A (4.22; 3.74; 3.87)
- BBB (3.37; 2.81; 2.75)
- BB (2.27; 2.38; 2.25)
- B (1.79; 1.80; 1.87)
- CCC (0.45; 0.33; 0.40)
- D (-0.19; -0.20; 0.05)
than Z-score for private manufacturing companies = 0.717 * X1 + 0.847 * X2 + 3.107 * X3 + 0.42 * X4 + 0.998 * X5 ...... where X4 = Book value of equity / Book value of liability
Z>2.9 ..... good (AA-BBB) Z<1.23 .... bad (CCC-C)
than Z-score for private non-manufacturing companies = 6.56 * X1 + 3.26 * X2 + 6,72 * X3 + 1.05 * X4 ...... where X4 = Book value of equities / Book value of liabilities
Z>2.6 ..... good (AA-BBB) Z<1.1 .... bad (CCC-C)
Altman's model for SME's (TO < 5 MM EUR)
X1 = EBIDTA / Total Sales
X2 = Short-term debt / Book value of equity
X3 = Retained earnings / Total assets
X4 = Cash / Total assets
X5 = EBITDA / Interest expenses
Z = -4.09 ln ( 1-X1 ) - 1.13 ln ( X2 ) - 4.32 ln ( 1-X3 ) + ln (X4) + 4.09 ln ( X5 )
PD = 1/(1+e^(Z+53.48))
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