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Z-Score

What is a Z-Score?

In the stock market, this is a famous mathematical cheat code used to predict if a company is about to go bankrupt. It combines five different financial ratios, such as profit, sales, and debt, into one single number. A score above 3 means the business is rock solid. If it drops below 1.8, it flashes bright red, meaning the company is in severe financial distress. It is incredibly useful when a stock looks ridiculously cheap, because it tells you if it's actually a bargain or a ticking time bomb.

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