Financial Risk
Applicable Variables: Capitalization, capital structure, market efficiency, cash flow to debt ratio, amortization, and interest payments.
A great scale for deducing a company's financial
strength is that of the Piotrotski F score named
after the famous University of Chicago professor,
James Piotrotski known for devising the fundamental scale. The scale assigns one point for each criterion the company coincides with, such as profitability, leverage, liquidity, source of funds, and operating efficiency.
A score between
while a score of
7 to 9 is optimal, Note: Analysis is ambiguous; nevertheless,
companies of lower market-capitalization tend to
confer higher risk.
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