Our Quadrant Analysis on the first page of the Financial Dialogue and FHR reports and shows the Core Health Score (medium-term sustainability) mapped against the FHR (default risk).
- Quadrant A: These companies are the strongest, with a low short-term default risk.
- Quadrant B: These companies are typically marginally profitable or unprofitable but have strong balance sheets which mitigate short-term risk.
- Quadrant C: These companies are the weakest, and typically exhibit poor profits and weak balance sheets, resulting in high short-term default risk and lack of sustainability over the medium term.
- Quadrant D: These companies are typically profitable with potentially strong margins but may carry aggressive debt loads with poor liquidity, making them vulnerable to any operational shocks such as loss of a key client.
The image below shows the long-term average percentage of companies which fall into each quadrant.