Use Altman Z-Score As Triage, Not Verdict
Use a distress score as a screening signal while preserving analyst judgment about fit and limitations.
A public manufacturing borrower has an Altman Z-score of 1.74. Decide how the analyst should use the result. Distress score -> driver diagnosis -> fit check -> credit action The trap is treating the score as a verdict. A score can flag distress but cannot replace cash-flow analysis, model-fit judgment, and current borrower evidence. Step 1 Read the score as a screening signal, not a default conclusion. A low score raises attention because it combines weak ratios, but it does not prove the borrower will default. Step 2 Identify which components drove the score: working-capital strain and weak EBIT/assets. Driver…
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