Z$-$Score Calculation:

Z $=1\mathrm{.}2$X$1+1\mathrm{.}4$X$2+3\mathrm{.}3$X$3+0\mathrm{.}6$X$4+1\mathrm{.}0$X$5$

Classification Based on Z$-$Score:

$$ Z$<=1\mathrm{.}8$: Significant risk of bankruptcy $($Distress Zone$)$

$1\mathrm{.}8=3\mathrm{.}0$: Not currently at risk of bankruptcy $($Safe Zone$)$

Financial Ratios:

$$ X$1$: Working capital $/$ Total assets $($Liquidity$)-$ Measures liquidity level relative to

company size.

$$ X$2$: Retained earnings $/$ Total assets $($Long$-$term profitability$)-$ Measures long$-$term

profitability over the company's life.

$$ X$3$: Earnings before interest and taxes $/$ Total assets $($Short$-$term profitability$)-$ Measures

recent profitability.

$$ X$4$: Market value of stockholders$$ equity $/$ Book value of total debt $($Solvency$)-$

Assesses the company$$s ability to pay its debt.

$$ X$5$: Sales $/$ Total assets $($Efficiency$)-$ Measures how well assets are utilized.