The Fish Rots From The Head: The Crisis in our Boardrooms: Developing the Crucial Skills of the Competent Director

by Bob Garratt

technique known as risk rating uses a company’s Z-score history to predict the probability of financial distress for such negatively scored companies. Taffler reinforces the supervising management message ‘that plotting corporate performance over time [means that] problems can be picked up before the Z-score goes negative, giving more time for appropriate action to be taken’. The work on Z-scores has progressed to the point where a workable formula is used in a number of companies. This looks at five ratios: 1 Working capital to total assets 2 Accumulated retained earnings/total assets 3 EBIT/total assets 4 Market capitalization/total liabilities 5 Sales/total assets