An application of the Z-Score

Abstract

The purpose of this study is to apply the Z-score methodology to a company in the Portuguese metallurgical sector operating in a structural crisis environment which had an impact on this sector and its organization. Thus, we gathered the financial statements of the company, from 2008 to 2012, and collected the essential data to apply the model. Simultaneously, we analysed the company’s strategy reflected on the plans and forward programs from 2012 to 2015. When we obtained and analysed the Z-score indicators related to the history of the company, we immediately noticed its serious deterioration. However, the administration of the unit, based on the strategy of diversification and reduction of costs, always thought it favorable to continue with the company. The turnaround strategy initiated and supported by prospective financial information, based on credible assumptions, clearly indicates that the Z-score indicators recover alongside with the implementation of this strategic line. The conclusions obtained indicate the importance of the strategy in the going concern, which is evident in the quantification provided by the model. Keywords: Strategy. Going concern. Z-score. Budgets. Forecasts.