Altman Z Score

Edward Altman discusses that he expects defaults to peak in 2009 to 2010.  He also discusses what the Z-Score is suggesting as a probability of default for the auto makers. 

The speaker provides a detailed explanation of the Altman Z-Score by providing a detailed explanation of the calculation.  He mentions that the Z-Score is a linear discriminant model which classifies borrowers into credit default risk categories and then goes on to discuss four key drawbacks of this calculation.

The Altman Z-Score calculation integrates a few important financial ratios together in order to arrive at a probability of bankrupcy for a company.  The Z-Score model has been configured to assign different weighting to each of these ratios in proportion to their importance.  As with any formula, you cannot apply a broad stroke over the entire marketplace; therefore, Alt