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Altman Z-Score Case Study

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First Altman Model (1968)
According to Altman (1968) in The Journal of Finance, the systematic Altman Z-Score formula can be formulated as follows:
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5
Information:
X1 = Net Working Capital / Total Assets
X2 = Retained Earning / Total Assets
X3 = Earning Before Interest and Tax / Total Assets
X4 = Market Value of Equity / Book Value of Debt
X5 = Sales / Total Assets

According to Endri (2009) the financial ratios of Altman Z-Score can be summarized as follows:
1. Net Working capital / Total Assets
This ratio shows how the company in generating working capital from the total total assets owned. Net working capital can be obtained by way of current assets minus current liabilities.
2. Retained earning / …show more content…

Husnan (1996: 291) says these variables can be company profits, dividends distributed, profit variability and so on.
Husnan (1996: 317) explains that technical analysis is an attempt to estimate stock prices by observing price changes in the past, as well as the volume of stock transactions that occur. In addition, fundamental analysis attempts to estimate future stock prices by (1) estimating the value of fundamental factors affecting future stock prices. (2) to apply the relationship of these factors in order to obtain the estimated price. In fundamental analysis there are two approaches that can be done that is present value approach and price earning ratio approach (PER) (Haveadi and Asri, …show more content…

The type of data used is secondary data that has been processed from the previous party from the primary data collectors and in the form of research journals required and financial statements of manufacturing companies 2010-2015 period published from the Indonesia Stock Exchange.

Data analysis technique
The First Altman Z-Score Analysis (1968)
According to Altman (1968) in The Journal of Finance, Z-Score Altman model is a model by predicting or classifying companies to determine the level of health based on the value of Z obtained. Systematically Altman Z-Score equations can be formulated as follows:
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5

Information:
X1 = Net Working Capital / Total Assets
X2 = Retained Earning / Total Assets
X3 = Earning Before Interest and Tax / Total Assets
X4 = Market Value of Equity / Book Value of Debt
X5 = Sales / Total Assets
Company classification based on Z value obtained are:
• If Z> 2.99, then enter into healthy company.
• If Z <1.81, then enter into a company that has the potential to go bankrupt.
• If Z is between 1.81 and 2.99 the firm goes into the gray area (possibly the company can bounce back or potentially

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