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.28 Robertson’s Z-score is represented by:

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.

Z=3.0X + 3.0X2 +0.6X3 + 0.3X4 + 0.3X5 where Xi (Sales Total assets)/Sales X2 = Profit before tax/Total assets X3 = (Current assets - Total debt)/Current liabilities X4 = (Equity - Total borrowing)/Total debt == X5 = (Liquid assets - Bank overdraft)/Creditors