CA Review Level Profesional_Altman Z Score_Manajemen Keuangan Lanjutan

Summary

In this presentation, Catur Sasongko explains the Altman Z-Score, a financial model used to predict a company's likelihood of bankruptcy within two years, or evaluate its creditworthiness. The formula for calculating the Z-Score is outlined, including key variables such as EBIT, net working capital, and market equity. Sasongko demonstrates the calculation process through practical examples for both publicly traded and privately held companies. The session also covers the interpretation of Z-Score results, helping companies assess their financial health and their ability to secure loans from banks.

Takeaways

• 😀 Altman Z-Score is a financial model used to predict bankruptcy and assess creditworthiness within two years.
• 😀 The Z-Score formula differs for publicly traded companies and private companies.
• 😀 For public manufacturing companies, the Z-Score formula incorporates EBIT, net working capital, sales, market value of equity, and retained earnings.
• 😀 The formula for private companies uses net working capital, retained earnings, EBIT, and book equity instead of market equity.
• 😀 A Z-Score below 1.23 indicates a high likelihood of bankruptcy for public companies, while a score above 2.9 suggests low bankruptcy risk.
• 😀 For private companies, Z-Scores are similarly interpreted, with a score above 2.9 indicating financial stability.
• 😀 The Z-Score can be used by banks to assess whether a company is creditworthy before approving a loan.
• 😀 The Z-Score formula for public companies includes weighted factors for each financial metric, based on the company's ability to generate profit, manage debt, and maintain liquidity.
• 😀 For private companies, the Z-Score provides an estimation of bankruptcy risk using financial ratios that reflect the company's operational liquidity and debt structure.
• 😀 In practice, the Z-Score is used to help investors and financial institutions make decisions about investment and lending risks.
• 😀 The example calculations for PT ABA and PTRST show how financial data such as EBIT, assets, liabilities, and equity are applied in the Z-Score formula to assess bankruptcy risk.

Q & A

What is the Altman Z-Score used for?

The Altman Z-Score is used to predict the likelihood of a company going bankrupt within two years and to assess the creditworthiness of companies seeking loans.

What financial data is required to calculate the Altman Z-Score?

To calculate the Altman Z-Score, you need financial data such as EBIT (Earnings Before Interest and Taxes), total assets, net working capital, sales, market equity, total liabilities, and retained earnings.

What is the difference between the Z-Score for publicly traded and privately held companies?

The Z-Score formula for publicly traded companies includes variables like market equity (market value of shares), while the formula for privately held companies uses the book value of equity and has different coefficients.

How does a low Z-Score relate to bankruptcy risk?

A low Z-Score (below 1.23 for public companies) indicates a high risk of bankruptcy, suggesting the company is financially unstable and may fail within the next two years.

What does a Z-Score between 1.23 and 2.9 indicate?

A Z-Score between 1.23 and 2.9 indicates a 'grey area', where the bankruptcy risk is uncertain. Companies in this range may need closer scrutiny to determine their financial health.

What is the importance of market equity in the Z-Score formula for public companies?

Market equity, which is calculated as the market value of the company’s shares multiplied by the number of shares outstanding, reflects the investor perception of the company's financial health and stability. A higher market equity suggests a lower risk of bankruptcy.

How is EBIT related to the Z-Score calculation?

EBIT (Earnings Before Interest and Taxes) is used in the Z-Score formula to measure a company's profitability. It is divided by total assets to assess how efficiently the company is generating profits relative to its asset base.

Why is the net working capital used in the Z-Score formula?

Net working capital (current assets minus current liabilities) measures a company's short-term financial health and liquidity. It reflects the company's ability to cover its short-term obligations, which is crucial for assessing bankruptcy risk.

How is the Z-Score calculated for PT ABA, a publicly traded company?

For PT ABA, the Z-Score is calculated by multiplying the relevant financial ratios (EBIT/Total Assets, Net Working Capital/Total Assets, Sales/Total Assets, Market Equity/Total Liabilities, and Retained Earnings/Total Assets) by their respective coefficients and summing the results. The calculated Z-Score for PT ABA is 5.215.

What does a Z-Score of 5.08 for PTRST indicate?

A Z-Score of 5.08 for PTRST, a privately held company, indicates that the company is financially stable and has a low likelihood of bankruptcy in the near future. This is based on its strong financial ratios and low risk of failure.