Define: Z Score

UK Accounting Glossary

Definition: Z Score


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What is the dictionary definition of Z Score?

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The Z Score is a multivariate formula, first devised in 1968 by Edward I. Altman (Assistant Professor of Finance at New York University), that aims to gauge the susceptibility of a business to failure.

An entity’s score is calculated by applying beta coefficients to a number of selected ratios taken from an organisation’s final accounts using the multiple discriminant analysis technique.

In 1983, A UK-based version of the Z score was introduced by Richard J. Taffler – who is a professor of finance and accounting at Warwick Business School.


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