Debt and bankruptcy risk · updated October 21, 2026
What is the Ohlson O-score and how is it calculated
The Ohlson O-score takes nine numbers from the financial statements and turns them into a probability: the chance the company runs into financial distress within two years. James Ohlson published it in 1980 as an alternative to the Altman score.
The Ohlson O-score formula
O=−1.32 − 0.407·SIZE + 6.03·TLTA − 1.43·WCTA + 0.076·CLCA − 1.72·OENEG − 2.37·NITA − 1.83·FUTL + 0.285·INTWO − 0.521·CHIN
- SIZE
- Company size (the log of assets, adjusted for inflation).
- TLTA, WCTA, CLCA
- Liabilities to assets, working capital to assets, current liabilities to current assets.
- OENEG
- 1 if liabilities are larger than assets.
- NITA, FUTL
- Profit to assets, and cash from operations to liabilities.
- INTWO, CHIN
- Whether it lost money two years in a row, and how profit changed.
- Probability
- 1 ÷ (1 + e^−O): turns the score into a percentage.
How to read the Ohlson O-score
Below 5%low risk
5% - 20%worth watching
Above 20%high risk
On our pages you see the probability directly, in percent.
When the Ohlson O-score can fool you
Large, stable companies: the model sometimes gives very low probabilities even when debt is rising. Banks: it does not apply.
Related terms
Questions about the Ohlson O-score
Why three bankruptcy models?
Each one looks at different numbers. When they all agree, the signal is stronger; when they do not, it is worth finding out why.
These explanations are for information only. They are not a recommendation to buy or sell.
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