Bankruptcy Risk Predictor

The Bankruptcy Risk Predictor is a sophisticated financial analysis tool that helps businesses and financial analysts evaluate the risk of bankruptcy. Using established financial models including the Altman Z-Score, this interactive calculator processes key financial data points to provide a comprehensive bankruptcy risk assessment. The tool provides detailed insights into a company’s financial health, highlighting areas of strength and weakness with actionable recommendations.

Key Features

• Comprehensive Z-Score Calculation: Implements the Altman Z-Score model, a well-established bankruptcy prediction formula widely used by financial professionals
• Multiple Financial Ratio Analysis: Calculates and evaluates seven critical financial ratios including Current Ratio, Debt Ratio, Return on Assets, and more
• Visual Risk Assessment: Features an intuitive risk meter that instantly shows where the company falls on the risk spectrum
• Detailed Insights: Provides specific, actionable recommendations based on the calculated ratios and identified weaknesses
• Interactive Charts: Visualizes ratio health using color-coded bar charts for easy interpretation
• PDF Report Generation: Allows users to download a professional PDF report of the analysis for sharing or record-keeping
• Responsive Design: Works seamlessly on all devices with a modern, user-friendly interface

Use Cases

• Business Health Check: Entrepreneurs and business owners can regularly assess their company’s financial stability
• Investor Due Diligence: Investors can evaluate the bankruptcy risk of potential investment targets
• Lender Risk Assessment: Banks and financial institutions can use it to assess borrower risk profiles
• Financial Planning: CFOs and financial planners can identify financial weaknesses before they become critical
• Educational Tool: Finance educators can use it to teach bankruptcy risk concepts with real-time examples
• Merger & Acquisition Analysis: M&A teams can evaluate target company financial health
• Advisory Services: Financial consultants can provide clients with quick preliminary risk assessments

How It Works

The tool operates by collecting essential financial data that can be found on company balance sheets and income statements:

1. Data Input: Users input key financial figures including current assets, current liabilities, total assets, total liabilities, net income, EBIT, retained earnings, and sales revenue.
2. Ratio Calculation: The system automatically calculates seven critical financial ratios that indicate different aspects of financial health:
   • Current Ratio (liquidity assessment)
   • Debt Ratio (leverage assessment)
   • Return on Assets (profitability assessment)
   • Asset Turnover (efficiency assessment)
   • Interest Coverage Ratio (debt service capacity)
   • Working Capital to Total Assets (liquidity/solvency assessment)
   • Retained Earnings to Total Assets (earned capital assessment)
3. Z-Score Computation: Using the Altman Z-Score formula, the tool weighs and combines multiple factors to generate a bankruptcy risk score.
4. Risk Assessment: Based on the Z-Score, the company is classified into one of three zones:
   • Safe Zone (Z-Score > 3.0): Low probability of bankruptcy
   • Grey Zone (Z-Score 1.8-3.0): Caution area with uncertain risk
   • Distress Zone (Z-Score < 1.8): High probability of financial distress/bankruptcy
5. Visualization: The results are displayed through an intuitive risk meter, color-coded ratio indicators, and comparative charts.
6. Actionable Insights: The system generates specific recommendations based on identified weaknesses, providing practical next steps for improving financial health.
7. Report Generation: Users can download a comprehensive PDF report containing all analysis results and recommendations for sharing with stakeholders or further review