Z Score Bankruptcy Model

The formula as below:

Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

A = Working Capital / Total Assets (WC/TA)
A measure of the net liquid assets of the firm relative to the total capitalization.

B = Retained Earnings / Total Assets (RE/TA)
Retained earnings is the account whick reports the total amount of reinvested earnings and/or losses of a firm over its entire life. In addition, the RE/TA ratio measures the leverage of a firm.

C = Earning Before Interest and Taxes / Total Assets  (EBIT/TA)
A measure of the true productivity of the firm's assets, independent of any tax or leverage factors.

D = Market Value of Equity / Total Liabilities (MVE/TL)
Shows how much the firm's assets can decline in value before the liabilities exceed the assets and the firm becomes insolvent.

E = Sales / Total Assets (S/TA)
The capital-turnover ratio is a standard financial ratio illustrating the sales generating ability of the firm's assets. It is one measure of management's capacity in dealing with competitive conditions.

Z > 3 : Safe Zone
1.8 < Z < 3 : Grey Zone
Z < 1.8 : Distress Zone

Top fishing (52-weeks high list) trading strategy

1. To pick stocks from the latest 52-weeks hight list.
2. Select stock price range from $20 to $50 per share.
3. Trading Volume > 200,000.
4. PE ratio < 50.
5. Avoid the very big market capitalization stock (market cap. < $5 billion).
6. Check out 6 months' stock chart - select stock have a clear tendency for a clear trend.
7. Avoid "defensive" stocks, like unitility, precious metals, food, oils, REIT etc.
8. Wee out take over situations.
9. Good earning growth rate > 10% and high ROE > 15%.
10. Diversifty among industry groups.