CMA Final · Strategic Performance Management and Business Valuation · Corporate Failure
Which statement about the Altman Z-score cut-offs for the original model is correct?
In the original Altman model, a Z-score above 2.99 is the safe zone and below 1.81 the distress zone. Scores from 1.81 to 2.99 form the grey zone, where failure cannot be predicted confidently.
- AA score above 2.99 places the firm in the safe zone and a score below 1.81 in the distress zoneCorrect
- BA score above 1.81 places the firm in the safe zone and a score below 2.99 in the distress zone
- CA score above 3.00 indicates imminent bankruptcy
- DScores between 1.81 and 2.99 are classed as certain failure
Explanation
In the original Altman model, Z above 2.99 is the safe zone, Z below 1.81 the distress zone, and 1.81 to 2.99 the grey zone where outcome is uncertain. The other options reverse or misstate these bands.
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