Methodology

This note explains what the Gregory Analytics UK Business Financial Health Index measures, how each measure is defined and what it cannot tell you. It is written so that a journalist, lender or accountant can judge how far to rely on it.

What the Index is

The Index describes the financial condition of UK companies by industry. It is built from a large dataset of UK company accounts, held and maintained by Gregory Analytics. It is a research resource, not a credit rating, and it says nothing about any individual company.

The measures

• Negative net assets. The share of companies whose liabilities exceed their assets. Net assets are total assets less total liabilities.
• Current ratio below 1. The share of companies whose current assets are smaller than their current liabilities, so short-term cover is under one times.
• Median current ratio. Current assets divided by current liabilities, taking the middle company in the industry. A median is used so that a few very large or very small companies do not distort the figure.
• Median cash. The middle company's cash balance.
• Cash down 25% or more. The share of companies whose cash fell by a quarter or more over the year.
• Change since 2015. The movement in a measure, in percentage points, against 2015.

Return on invested capital, cash conversion and the cash conversion cycle are in the free calculator and are being added to the industry pages as the data allows.

How industries are grouped

Companies are grouped by the UK Standard Industrial Classification into 18 broad industries. Financial and insurance activities, and households and extraterritorial bodies, are left out because their balance sheets are not comparable with trading businesses.

Calculator contributions

Figures entered into the calculator by users who select UK limited company are added anonymously to the dataset. No name, email address, company name or IP address is collected, and individual submissions cannot be identified. Nothing is collected for other business types. Calculator figures are not published individually. The privacy notice has the detail.

What we publish and what we do not

We publish industry-level figures and totals. We do not publish figures for any group so small that a single company could be identified. We do not describe how the dataset is assembled.

Limitations

• The population includes dormant companies and members of groups, which affects the proportion of companies with negative net assets. Industry figures should be read as a picture of UK companies in general, not of trading companies alone.
• Small companies publish limited information, so some measures, such as staff costs, are available for few of them. Measures that need little disclosure are used for industry comparisons.
• A balance sheet is a snapshot at one date. Seasonal businesses will look different at different year ends.
• Some definitions changed over the period, which can cause a step in the long-run lines. We say so where it affects a chart.
• Negative net assets is not insolvency. Many companies with negative net assets are supported by their directors or parent companies.

Updates and corrections

The Index is refreshed as new data is processed, and each page shows when it was last updated. If you think a figure is wrong, tell us and we will check it and correct the page.