A version of the Altman Z-Score for non-manufacturing, service and private companies. It drops the sales-turnover term and uses book equity instead of market value.
Formula: Z'' = 6.56·WC/TA + 3.26·RE/TA + 6.72·EBIT/TA + 1.05·BookEquity/TL
How to read it: Z'' > 2.6 = Safe Zone · 1.1–2.6 = Grey Zone · Z'' < 1.1 = Distress Zone. Not meaningful for banks or insurers.
Published by Edward Altman in 1995 because the original model's sales/assets term penalised asset-light businesses and needed a market price. This is the version without the +3.25 constant used for emerging-market bonds.