... to predict, however, if we can spot signs of financial distress early enough, there will be more time to act and try to save the company. If given enough notice, managers may be able to change their strategies and the structure of the organisation. The way in which this would be done is to use failure prediction models. There are several different types of failure prediction models such as Altman's 'Z' Score Model, Tafler's Model and Argenti's Model. Altman's 'Z' Score Model is a type of multi-variate analysis which uses a formula to calculate a figure for 'Z'. If this figure is above 2.7 the organisation is a going concern, but if it is less than this there is a problem which is classed as potentially serious if the 'Z' score is 1.8 or less. The formula for calculating the 'Z' Score is: Z = 1.2A + 1.4B + 3.3C ...

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