Interpretation of the z-score concentrates

Reference no: EM131048958

Robertson identifies four main elements which cause changes in the financial health of a company: trading stability; declining profits; declining working capital; increase in borrowings.36 Robertson's Z-score is represented by:

Where

Interpretation of the Z-score concentrates on rate of change from one period to the next. If the score falls by 40% or more in any one year, immediate investigations must be made to identify and rectify the cause of the decrease in Z-score. If the score falls by 40% or more for two years running, the company is unlikely to survive. Compare and contrast Robertson's Z-score with:

(i) Altman's Z-score;

(ii) Taffler's Z-score and PAS-score.

Reference no: EM131048958

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