The Probability of Bankruptcy
A good metric should have a low probability of rejecting a true hypothesis of bankruptcy (false positive) and a high probability of rejecting a false hypothesis of bankruptcy (false negative).
Z-index
Predicting Bankruptcy
The Z-score formula for predicting bankruptcy was developed by E. Altman. The score is not intended to predict when a firm will file for bankruptcy, It is a measure of how closely a firm resembles other firms that have filed for bankruptcy.