H-Score®: Overview of the 7 factors

The contribution power of each factor depends on the financial structure of the company being assessed. In addition, the H-Score® takes into account the size of a company.

1. Profitability

We measure the extent to which a company is generating profits sufficient to meet the company’s short-term commitments. The more profitable the company, the better.

2. Liquidity

We review the liquid assets of debtors and cash in relation to the rate of expenditure. The higher the debtors and cash in relation to current liabilities, the better. 

3. Stock and Debtors

We look at how working capital is managed. The lower the stock and debtor levels the better. High stock and debtor levels mean they’re not being converted into cash fast enough.

4. Current Assets

We measure the extent to which the current assets provide cover over the company’s liabilities. The higher the current assets in relation to total liabilities, the better. 

5. Equity Base

We measure the adequacy of the equity base in relation to its liabilities. The higher the level of shareholders’ funds and minority interest in relation to other liabilities, the better. 

6. Current Funding

We measure the extent to which a company is funding its total assets using current liabilities. The higher the dependence on current liabilities, the worse it is.

7. Debt Dependency

We look at the dependence of a company on debt for the funding of its tangible assets. The higher the level of bank debt (with particular emphasis on short-term debt), the worse it is.