Z-Score: A Predictive Tool of Financial Health (A Comparative Study of Andhra Bank & Indian Bank)

Abstract

The Z-score is one of the important tools to measure the company’s financial health and utilizes various important ratios for its formulation. The banking industry comes under to service sector. Service sector plays a wider role in growth of the country’s economy. The financial health is one of the important elements in the present financial crisis facing the banks due to increasing the non-performing assets in both public and private sector banks in India. In this context it is necessary to understand the reasons for a bank sickness and the second question is- is it possible to estimate a banks failure using few modelling techniques with reasonable accuracy. The present research paper deals in analysis of financial health of selected public sector bank namely Andhra bank and Indian bank using tool Z-score developed by Altman and concluded that the public sector banks Andhra bank and Indian bank are under study fall in Grey zone. According to Z-score there is a probability of facing bankruptcy problem in Andhra bank in coming few years.