Finance is an infinitely dynamic field and no investment course can survive the progress of time ad infinitum.
As markets become more efficient once an investment strategy is known, the course maintains its relevance but has to constantly be on the search for new investment strategies.
The user of Altman’s Z is a novel idea suggested by Dr Wealth staff Irving Soh and has great potential as a new strategy to be taught to the new students of the program.
Altman’s Z was developed by Edward Altman, a New York University Professor who wanted a metric to measure how likely a company would go bankrupt.
It is a linear combination of five financial ratios:
Working Capital divided by Total Assets Retained earnings divided by Total Assets Operating Earnings divided by Total Assets Market Capitalization divided by Total Liabilities Sales divided by Total Assets
The coefficient of each factor is unimportant