About the Financial Health Rating (FHR)

Run Xu
Run Xu
  • Updated

The Financial Health Rating (FHR™)  is a consistent analysis metric which allows you to benchmark your company against your peers, track your performance, and demonstrate your strength externally. The rating is a number from 0-100 that indicates the financial health of a company. It is an industry standard for determining a company’s viability.

 

The FHR is calculated across thousands of data-points within the company's financial statements. We use sophisticated profiling techniques to benchmark the financial characteristics of the company against millions of observations. 

 

A company’s Financial Health Rating is an accurate and predictive indicator of its future performances as a business partner or supplier. It is used by companies to signal their financial security and to win more business. 

 

FHR Analysis

  • Is based purely on financial statement data (Income Statement, Balance Sheet, Cash Flow Statement)
  • Employs 24 industry-specific models to account for variations in industry-specific risk
  • Is calculated with 62 efficiency ratios and 11 default-resiliency ratios
  • Is company specific, with no broad market sentiment or geo-political data incorporated

For more information on our methodology, head over to our Advanced Methodology article. 

 

What analysis provided with each FHR?

The FHR is a comprehensive measure of financial risk, and it will always be provided with the following contextual and supporting information:  

  • Risk Level: Five color-coded risk categories aligning to the Financial Health Rating. Very High Risk, High Risk, Medium Risk, Low Risk and Very Low Risk
  • Estimated Probability of Default (EPD): The percentage probability the company will default within the next 12 months  

  • Core Health Score (CHS):A measure of operating and structural efficiency based on the industry-specific analysis of 62 financial ratios. A medium-term indicator of sustainability  
  • Resilience Indicators: Performance measures related to leverage, liquidity, and earnings performance are aligned with short-term default risk
  • Financial Period Date: The financial period for the financial statements used in the underlying analysis  
  • Annual or Quarterly Delta: The change in rating over the prior 12 or 3 months

In addition to the ability to review your FHR score, you can download the full FHR report which gives you a deep and detailed analysis of your company’s financial health.

 

FHR Report

The FHR Report provides a deep dive into the financial health of the company as measured by RapidRatings’ analytical models. It presents the company’s current and historical risk trend for up to nine years, its strengths and weaknesses. This report provides the highest level of commentary and in-depth information.

 

 

The FHR report includes the following:

  • The Financial Health Rating (FHR), Core Health Score (CHS), and Estimated Probability of Default (EPD)
  • Current and historical analysis of the company's strengths and weaknesses with peer comparisons
  • Full balance sheets, income statements and cash flow statements
  • Liquidity ratio, activity ratio and cash flow ratio analysis sections
  • Simulation of the affect of abnormal items

Executive Summary

The executive summary of the FHR report provides commentary on various aspects of the company’s performance including core health and default risk. It discusses the interplay of the resilience indicators which underpin default risk, and core health which drives long term operational efficiency. We comment on how this impacts short- and long-to-medium- term outlook for the company.

 

The FHR is a common language making every risk assessment more efficient and effective.

 

 

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