The definitive measure of any company's financial health





Technical References

• H-Score Methodology

• Lorenz Curve Analysis

Displayed graphically, the H-Score is a ranking of all companies on a scale of 0 (worst) to 100 (best). Companies in the Warning Area (H-Score of 25 or less) share the characteristics of companies that subsequently failed and may be vulnerable. It is rare for companies to fail or experience major distress as long as their H-Score remains outside the Warning Area.

Historically, when the economy was weak, 1 in 4 companies in the Warning Area failed or had a major reconstruction within 3 years. This improved to 1 in 5 as the economy recovered.

Companies in the Warning Area will include:

• Companies that have had one or more serious weaknesses and would be better off correcting them. This describes the majority of companies in the Warning • Companies temporarily weakened by a major event ( For example a major acquisition funded short term). In many cases such companies are able to trade themselves out of such a position in a reasonably short period of time. However it is important to recognise the existence of such an issue when it does arise, because it could turn into a serious weakness if not addressed.

• Companies that have a proven ability to run their businesses from an inherently weak Balance Sheet position (For example companies with a proven history of profitable sales growth but accompanied by negative tangible Net Worth and high levels of debt). Such companies are usually rather more dependent on their continuing sales growth and profitability in order to retain the confidence of their suppliers, lenders and investors.

• Companies that have a proven ability to run their businesses from an inherently weak Balance Sheet position (For example companies with a proven history of profitable sales growth but accompanied by negative tangible Net Worth and high levels of debt). Such companies are usually rather more dependent on their continuing sales growth and profitability in order to retain the confidence of their suppliers, lenders and investors. .

The dotted line shows the industry average H-Score.

The H-Score is a measure of the financial health of any company. It is based on a mathematical evaluation of a company’s publicly available financial results, an evaluation that reviews a company from seven points of view simultaneously in order to determine its overall financial health. The H-Score models are country specific and purpose-built to cater for different types of company.

Overview

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