Clusters & Dimensions
Financial Structure
The balance sheet and cash flow characteristics that determine how resilient a company is to financial stress.
The Financial Structure cluster looks at the quality and safety of a company's balance sheet and cash flows. It answers the question: how much financial cushion does this company have, and how good is the underlying quality of its earnings?
Debt Burden
Total debt divided by EBITDA — the most common measure of leverage. A ratio above 4x is generally considered high; below 2x is considered conservative. Highly leveraged companies are more vulnerable to rate increases, credit tightening, and revenue downturns because they have less flexibility.
Higher score = worse.
Floating Rate Debt Ratio
The proportion of a company's debt that carries a variable interest rate, proxied by short-term debt as a share of total debt. When rates rise, variable-rate borrowers immediately face higher interest expense. Companies with mostly fixed-rate, long-maturity debt are insulated until they need to refinance.
Higher score = worse when rates are rising.
Near-Term Debt Maturity
How much of the company's debt needs to be refinanced in the near term. Companies with large near-term maturities must go back to the debt market at prevailing rates, which can be painful in a high-rate or tight-credit environment. This is proxied by short-term debt as a share of total debt.
Higher score = worse when credit conditions are unfavourable.
Financial Health
A composite score combining the current ratio (current assets divided by current liabilities, measuring short-term liquidity) and the interest coverage ratio (EBITDA divided by interest expense, measuring the ability to service debt). A company with a current ratio above 2 and interest coverage above 10 is in robust financial health.
Higher score = better.
Earnings Quality
Free cash flow divided by net income. A ratio consistently near or above 1.0 means the company is converting its reported earnings into real cash — the profit is not just an accounting artefact. A ratio well below 1.0 may indicate aggressive revenue recognition, large non-cash charges being added back, or heavy working capital consumption.
Higher score = better.