The Ohlson O-score for predicting bankruptcy is a multi-factor financial formula postulated in 1980 by Dr. James Ohlson of the New York University Stern Accounting Department as an alternative to the Altman Z-score for predicting financial distress.
[1] The Ohlson O-Score is the result of a 9-factor linear combination of coefficient-weighted business ratios which are readily obtained or derived from the standard periodic financial disclosure statements provided by publicly traded corporations.
Two of the factors utilized are widely considered to be dummies as their value and thus their impact upon the formula typically is 0.
The original Z-score was estimated to be over 70% accurate with its later variants reaching as high as 90% accuracy.
However, no mathematical model is 100% accurate, so while the O-score may forecast bankruptcy or solvency, factors both inside and outside of the formula can impact its accuracy.