1) The original Z 1 -score formula for predicting bankruptcy has been introduced
by Edward Altman in 1968,
when it was used to predict the bankruptcy probability of a firm
within two years. It is a linear combination of five financial ratios, concerning multiple
corporate income and balance sheet values which can measure the financial health of a
company, weighted by coefficients.
The Z 1-score discriminant formula developed by Altman is: