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Piotroski F-Score and Altman Z-Score

Two classic strength tests from two years of financial statements: Joseph Piotroski’s F-Score rates profitability, leverage and efficiency from 0 to 9, and Edward Altman’s Z-Score, in its emerging-markets version, measures the risk that the company runs into financial distress.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Oct 31, 2026

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—Piotroski F-Score
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Piotroski’s 9 criteria

Each criterion met is worth 1 point. Scores of 8 and 9 point to an improving company; 0 to 2, a deteriorating one.

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Altman Z-Score for emerging markets

Above 5.85: safe zone; between 4.15 and 5.85: grey zone; below 4.15: risk of financial distress.

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Criteria and components

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Method, assumptions and sources

Formulas

F-Score (Piotroski, 2000): 1 point each for: ROA > 0; operating cash flow > 0; higher ROA; operating cash flow > net income; lower LT debt ÷ assets; higher current ratio; no new shares; higher gross margin; higher asset turnover
Altman Z-Score for emerging markets = 3.25 + 6.56 × working capital ÷ assets + 3.26 × retained earnings ÷ assets + 6.72 × EBIT ÷ assets + 1.05 × equity ÷ total liabilities
Zones: above 5.85 safe; 4.15 to 5.85 grey; below 4.15 distress

Assumptions and limits

  • Simplification: uses year-end assets. The models do not fit banks and insurers well.
  • Calculation tool using data entered by the user. It is not securities analysis or a recommendation to buy or sell; investment decisions are the user’s responsibility.

Official sources and references

Frequently asked questions

What is the Piotroski F-Score?

A 0 to 9 score created by professor Joseph Piotroski in 2000. It adds one point for each of nine tests of profitability, leverage, liquidity and efficiency comparing two consecutive years, to separate improving companies from deteriorating ones.

What F-Score is good?

Scores of 8 or 9 point to a company improving on almost every front; 0 to 2 point to broad deterioration. In Piotroski’s study of cheap stocks, the high scorers clearly beat the low scorers.

What is the Altman Z-Score?

A formula by Edward Altman that combines balance-sheet ratios to estimate the risk of financial distress. In the emerging-markets version used here, above 5.85 is safe, 4.15 to 5.85 is a grey zone and below 4.15 is the distress zone.

Do these models work for banks?

No. Both were built for industrial and commercial companies. Banks and insurers have very different balance sheets, with high leverage by nature, so the scores would be misleading.

How do I read the result of the example on the page?

In the example, the company meets 7 of the 9 criteria: it passes every profitability test, but it issued new shares (from 500 to 520 million) and its gross margin slipped from 35.0% to 34.5%. With 7 points, the picture is neutral. The Z-Score is 6.57, in the safe zone, supported mainly by EBIT relative to assets.

Where do I find the numbers for the two years?

In the annual financial statements: net income, revenue and gross profit on the income statement; assets, liabilities, debt, retained earnings and equity on the balance sheet; and operating cash flow on the cash flow statement. Always use two consecutive years prepared on the same basis.

Does a high F-Score mean I should buy?

No. The F-Score shows whether fundamentals improved between two years and the Z-Score estimates financial risk; neither says whether the share price is fair. Use the scores as a screen, combine them with a valuation and, if needed, with advice from a licensed professional.

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Piotroski F-Score and Altman Z-Score: testing a company’s financial strength

Cheap stocks are cheap for a reason, and sometimes the reason is that the business is getting worse. Two classic models help separate the healthy companies from the fragile ones using only the financial statements.

Piotroski F-Score

In 2000, accounting professor Joseph Piotroski proposed nine simple tests, each worth one point, comparing two consecutive years:

GroupTests (1 point each)
ProfitabilityPositive return on assets; positive operating cash flow; higher return on assets; operating cash flow above net income
Leverage and liquidityLower long-term debt relative to assets; higher current ratio; no new shares issued
EfficiencyHigher gross margin; higher asset turnover

In his study of cheap stocks (low price-to-book), those scoring 8 or 9 beat those scoring 0 to 2 by a wide margin. The score works best as a filter among stocks that already look cheap.

Altman Z-Score

Edward Altman created the Z-Score in 1968 to estimate the risk of bankruptcy. The version for emerging markets used here is Z = 3.25 + 6.56 × (working capital ÷ assets) + 3.26 × (retained earnings ÷ assets) + 6.72 × (EBIT ÷ assets) + 1.05 × (equity ÷ total liabilities). Above 5.85 is the safe zone; 4.15 to 5.85, the grey zone; below 4.15, the distress zone.

Limits

Both models were built for industrial and commercial companies and do not fit banks or insurers. They are statistical screens: a good score does not guarantee a good investment, and a bad one calls for a closer look rather than an automatic sale.