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RATIOS & STATISTICS / ADVANCED
AltmanX2
Full Description

This is not the typical definition of retained earnings; the portion of annual profits not paid to shareholders as dividends. We use the balance sheet item showing the cumulative retained earnings over the life of the company, scaled by total assets to facilitate comparison among different size companies. The measure, used by Prof. Edward Altman as part of the Z Score he developed, discriminates against newer companies that have not had sufficient time to accumulate substantial retained earnings. That's intentional. Altman points out that short history tends to be associated with greater risk of failure. In addition, this ratio measures the extent to which firms financed their assets through retention of profits, as opposed to debt

Our Formula

AltmanX2 = RetainedEarnQ/AstTotQ

NOTE: when N/A's are encountered during preliminary reports the preliminary data is excluded by falling back to previous quarter

Related Factors:

AltmanX1 AltmanX2 AltmanX3 AltmanX4 AltmanX5 AltmanX4Rev AltmanZ