While the Altman Z-score remains a popular tool for bankruptcy prediction, its reliability can vary across industries and economic cycles. In modern economies, with the inclusion of intangible assets and service-driven firms, adjustments may be needed. Combining it with qualitative assessments and sector-specific ratios enhances its robustness.
Predictive power: The Altman Z-score model has been shown to be effective in predicting financial distress, with a high degree of accuracy in various studies.
Industry applicability: While initially developed for manufacturing companies, the model has been shown to be effective in predicting financial distress, with a high degree of accuracy in various studies.
Limitations: Some studies highlight the model's limitations, such as not accounting for industry - specific factors or macroeconomic conditions that can impact financial health.
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