NEW YORK ( TheStreet) -- Retail risks are still a major concern, as consumer spending remains skittish and the job market continues to worry shoppers.
The economic downturn has, of course, already eliminated several retail powerhouses, including Circuit City and Linens 'N Things. But while the fear of bankruptcy filings has, for the most part, subsided, some companies remain in danger of insolvency. continue to flirt with the danger zone.
One way to test if a company poses any threat of filing for bankruptcy is through the Altman Z-Score, a formula developed by New York University professor Edward Altman in 1968. The Altman Z-Score measures several aspects of a company's financial health to forecast the probability of it going bankrupt within two years. Since its inception, the formula has been 72% accurate in predicting corporate bankruptcies two years prior from the filing.
On a general basis, companies with a Z-Score higher than 3 are considered safe, while those with a score of 1.8 or lower are considered distressed. Anything in between is a grey area."I think