Section 2 of your FHR Report, titled FHR History and Performance Category Analysis, is where you look when you want to know what is behind your current score. It shows the headline figures for your current period, your rating trend over time, and the seven performance categories that combine to produce your Financial Health Rating. Reading it in order is the fastest way to get from "my rating is X" to "here is why my rating is X."
What Section 2 shows you
Section 2 is one page with three parts:
The headline figures for your most recent period: your Financial Health Rating (FHR), your Core Health Score (CHS), your Estimated Probability of Default (EPD), and your Simulated FHR.
The FHR History chart: your FHR plotted across multiple reporting periods so you can see the trajectory that led to your current score.
The Performance Category Analysis: a breakdown of the seven categories that combine to produce your FHR, each showing where you currently stand.
Reading these in order (headline figures, then history, then categories) walks you from the top-level result down into the drivers.
The four headline figures
Financial Health Rating (FHR). Your 0 to 100 rating for the most recent reporting period. This is the number your clients see and the one that determines your risk band. Very Low Risk sits at 80 to 100, Low Risk at 60 to 79, Medium Risk at 40 to 59, High Risk at 20 to 39, and Very High Risk at 0 to 19.
Core Health Score (CHS). A 0 to 100 score that measures the medium-term operational efficiency and structural soundness of your business, on the same scale as the FHR itself. Your CHS is often close to your FHR, but the two can diverge: a company can have strong operational fundamentals (high CHS) alongside short-term financial pressure that pulls the FHR down, or the reverse. When your CHS and FHR are far apart, the gap itself is telling you where to look.
Estimated Probability of Default (EPD). The model's estimate of the probability that your company defaults over the next twelve months. At RapidRatings, default specifically means a bankruptcy filing, not a missed payment or a covenant breach. EPD moves inversely with your FHR: a higher FHR corresponds to a lower EPD.
Simulated FHR. The rating you would receive if the effect of any abnormal items in your financials was normalized. Abnormal items are unusual one-time entries (a large write-down, an unusual gain, an accounting restatement) that can distort a single period's ratios. If your Simulated FHR is close to your actual FHR, abnormal items are not doing much work in your current rating. If the two differ meaningfully, abnormal items are pushing your rating in one direction or the other, and it is worth understanding which items and why.
For more on what each FHR risk band means in practice, see Understanding Your Risk Category.
The FHR History chart
Underneath the headline figures, your FHR is plotted across your most recent reporting periods. Three things to check on the chart:
Direction. Is your rating trending up, holding steady, or declining across the periods shown? A rating that has drifted downward across three or four periods reads very differently from one that dropped in a single period.
Magnitude of the most recent movement. A shift of one or two points is normal period-over-period noise. A shift of five or more points warrants attention. A shift of ten or more is a material change and will almost certainly draw client questions.
Whether you have crossed a risk band. Clients react to the band, not the exact number. Moving from 62 to 48 crosses from Low Risk into Medium Risk, and that reclassification is what draws questions. Moving from 95 to 81 stays inside Very Low Risk and typically does not.
The Performance Category Analysis
Underneath your FHR sit seven performance categories, split into two groups.
The four Core Health categories
These combine to produce your Core Health Score. Each is scored on a 0 to 100 scale, the same scale as the FHR and CHS above them.
Operating Profitability is an upstream view of how efficiently you generate profit before taxes and financing costs.
Net Profitability is a downstream view of profit after taxes and financing costs.
Cost Structure Efficiency measures how your costs (cost of goods sold, staff costs, interest, depreciation, and so on) compare to your revenue and total spend.
Capital Structure Efficiency measures how your mix of assets, liabilities, and equity is structured.
The three Resilience Indicators
These measure your short-term capacity to absorb a financial shock. They are labeled Weak, Adequate, or Strong rather than shown as numeric scores.
Leverage measures how dependent your assets are on debt relative to equity.
Liquidity measures your ability to cover short-term obligations from cash and near-cash resources.
Earnings Performance measures your capacity to meet internal and external obligations from your operating results.
A note on the two different scales
The two scales in Section 2 are the single most common source of confusion when reading the report. Core Health categories move on a 0 to 100 scale, so a change of ten points is a real change worth explaining. Resilience Indicators move between three discrete labels, so a category shifting from Adequate to Weak is a bigger event than a single word change suggests. When you are comparing periods, treat a Resilience label change with the same seriousness as a ten-point Core Health movement.
Using Section 2 to answer "why is my score what it is"
Work through Section 2 in this order:
Compare the FHR and CHS. If they are close, your current rating is being driven mostly by your medium-term operational health, with Resilience factors playing a supporting role. If they are meaningfully apart, short-term factors are doing significant work on your rating.
Check the FHR History for the direction and magnitude of your most recent movement.
Look at the four Core Health category scores. Identify which one moved most since your last rating, in which direction, and by how many points.
Check the three Resilience Indicators. Identify any that changed a label (Strong to Adequate, or Adequate to Weak, or the reverse).
Check the Simulated FHR against your actual FHR. If they differ meaningfully, abnormal items are affecting your rating and understanding which items is worth doing.
Match what you see in the categories against what changed in your business that period. A margin compression, a large payment, a drawdown on a credit line, a debt restructuring: each of these tends to show up in a specific category.
Two useful patterns for interpreting what you find:
If Core Health moved and Resilience stayed the same, a Core Health category is doing the work. Look at whichever of the four moved most.
If Core Health held steady and Resilience shifted, a short-term financial factor is doing the work. Look at whichever Resilience Indicator changed label.
If both moved, start with whichever moved by more, and read the second as a compounding factor rather than a separate story.
What to do with what you find
Once you have identified the moving category, three follow-ups usually come up.
If you want a fuller diagnostic that pulls this reading logic together with what typically causes each category to move, see Why Did My FHR Change?.
If you want to model how planned improvements would change your rating before your next financial submission, use ActionPath to build a plan and see the projected FHR that would result.
If you believe a specific line item from your financial submission was misclassified or entered incorrectly, that is a different situation from a normal rating movement and is worth flagging directly. See Correcting Misallocated Line Items for how to request a review.
Frequently asked questions
What is Section 2 of my FHR Report? Section 2 is titled FHR History and Performance Category Analysis. It shows four headline figures for your current period (FHR, Core Health Score, Estimated Probability of Default, and Simulated FHR), a chart of your FHR over time, and the seven performance categories that combine to produce your rating. It is the section to read when you want to understand what is driving your current score.
Why is my Core Health Score different from my FHR? Your Core Health Score measures medium-term operational efficiency and structural soundness. Your FHR combines that Core Health Score with three Resilience Indicators that measure your short-term financial capacity. A CHS higher than your FHR usually means short-term Resilience factors are pulling your overall rating down. A CHS lower than your FHR is less common and usually means strong short-term Resilience factors are supporting a rating that operational efficiency alone would not.
Why does one of my Resilience Indicators show a letter instead of a score? Resilience Indicators (Leverage, Liquidity, and Earnings Performance) are reported as Weak, Adequate, or Strong rather than on a 0 to 100 scale. The four Core Health categories above them use the 0 to 100 scale. Both are correct: they are two different measurement systems on the same page.
What is the Simulated FHR I see in Section 2? The Simulated FHR is the rating your company would have received if the effect of any abnormal items in your financials was normalized. Abnormal items are unusual one-time entries such as a large write-down or an unusual gain that can distort a single period's ratios. If your Simulated FHR is close to your actual FHR, abnormal items are not moving the rating much. If the two differ meaningfully, abnormal items are pushing your rating in one direction or the other. See Simulated FHR for more.
Which category in Section 2 should I focus on first? Whichever moved most since your last rating. If a Core Health category shifted by ten or more points, or a Resilience Indicator moved a label (for example, from Adequate to Weak), start there. If nothing has moved much, your FHR is being held by the current mix rather than by any single change, and any category that is noticeably weaker than the others is a good candidate for improvement work.
A category in Section 2 dropped and I do not know why. What do I do? Read Why Did My FHR Change? for the common causes of a movement in each category. If you still cannot account for the change, or you think a line item may have been recorded incorrectly, see Correcting Misallocated Line Items to request a review.
Where do I find the ratios behind each performance category? The full list of 68 ratios and how they map to each category is in Ratios and Performance Categories. Section 2 shows you the category-level scores; that article shows you what sits underneath them.