When looking at the probability of bankruptcy, you want to ensure there is a normalized z-score, which means you do not want the data to be too far from the mean, which is what the z-score measures. When looking at this data point, the probability of bankruptcy is a value between 0 and 100, which will tell you the probability of the company having financial distress in the next 2 years. This is very important to consider because you do not want to invest in a company that is potentially going under.

This data point is certainly a complicated one because you can look at it in either a statistical light or a matter of fact light. When you look at a company that is struggling, you can certainly tell by just how things are and by something simple as cash flow if they are going to succeed. Benjamin Graham, the most well known person of value investing searched for these types of distressed companies, but that is a story for another day. As stated here on Macroaxis, probability of bankruptcy should not be confused with the actual chance of a company to file for bankruptcy protection.