The Altman Z-score is a famous formula for measuring a company's financial worthiness devised by Edward Altman. I sat down with Altman in Hong Kong recently to discuss the Z-score, its original ...

Naturally, the formula isn’t perfect. The Altman Z-Score doesn’t do the best job accounting for deferred revenue, which can make software companies in particular look worse off than they really are.

Altman considered companies with an Altman Z-Score over 2.6 “safe,” companies with a score between 1.1 and 2.6 in a “gray” zone, and companies with a score under 1.1 “at risk.” In brief, the formula ...