The Altman Z-Score is a quantitative formula combining multiple financial ratios to predict the probability that a company will go into bankruptcy within 2 years.

The model classifies companies into three risk zones based on their score:

• Safe Zone ($Z > 2.99$): Financially sound with minimal short-term bankruptcy risk.
• Grey Zone ($1.81 \le Z \le 2.99$): Average financial health; warrants close monitoring for deterioration.
• Distress Zone ($Z < 1.81$): Severe financial distress with a high probability of bankruptcy within 2 years.

Originally designed for traditional manufacturing firms, Z-Score relies heavily on physical assets and working capital. It is not applicable to financial institutions and can misclassify asset-light tech companies or unique cash-flow models. Z-Score acts as a "health checkup" for corporate solvency and credit risk. It quickly flags bankruptcy hazards through hard ratios, but must always be evaluated in industry context.