- 1). Open Excel.
- 2). Enter the labels "Working Capital" and "Total Assets" in cells A1 and B1 respectively. In cell C2, put in 1.2 for public companies and 0.717 for privately held ones. In cell D2, enter the formula "=A2/B2*C2" and enter the company's Working Capital and Total Assets into cells A2 and B2.
- 3). Enter the labels "Retained Earnings" and "Total Assets" in cells A4 and B4, respectively. In cell C5, put in 1.4 for public companies and 0.814 for privately held ones. In cell D5, enter the formula "=A5/B5*C5" and enter the company's Retained Earnings and Total Assets in cells A5 and B5. (The numbers in B2 and B5 should be the same.)
- 4). Enter the labels "EBIT" (Earnings Before Interest and Taxes) and "Total Assets" in cells A7 and B7, respectively. In cell C8, put in 3.3 for public companies and 3.107 for privately held ones. In cell D8, enter the formula "=A8/B8*C8" and enter the company's EBIT in A8 and the Total Assets in C8. (Again, C8 will be the same number as was entered in B2 and B5.)
- 5). Enter the labels "Equity" and "Liabilities" in cells A10 and B10. In cell C11, put in 0.6 for public companies and 0.420 for privately held ones. In cell D11, enter the formula "=A11/B11*C11" and input the company's Equity holdings and total Liabilities in the appropriate cells.
- 6). Enter the labels "Sales" and "Total Assets" in cells A13 and B13, and enter 0.999 in cell C14 for publicly held companies and 0.998 for privately held ones. In cell D14, enter the formula "=A14/B14*C14".
- 7). Enter the formula "=SUM(D2:D13)" in cell D14. This will give you the final Z score. Higher Z-scores indicate lower likelihood of bankruptcy than lower ones, with scores of 3 or higher being comparatively safe, and cores under 1.8 indicating that bankruptcy is likely.
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