Changing Zs

The Altman Z-score is designed to measure the financial strength (or lack thereof) for a company. But, as corporate financing decisions have changed, so has the Z-score. Historically, a Z-score less than 1.8 indicated possible financial distress, but Edward Altman argues that now negative Z-scores indicate financial difficulty. Currently, there are are six companies in the S&P 500 with negative Z-scores. Of course, the Z-score was designed to measure the financial strength of manufacturing companies. For non-manufacturing firms, the Double Z Prime score is more appropriate