Learn More About The Credit Standards Index
The Credit Standards Index (CSI) is a comprehensive analysis and ranking of over 2,000 publicly-traded companies designed to provide information on the credit standards, financial strength and overall stability of companies that engage in trade credit listed on U.S. stock exchanges. Standards form the basis of credit risk management decision making.
The CSI, now in its seventh year, clearly shows that organizations with the highest standards are more profitable, more financially secure and the most stable of all companies. Conversely, organizations with lower credit standards tend to be less profitable, less financially secure and the least stable of all companies.
The CSI also provides a one-of-a-kind financial analysis of 70 distinct industry groups organized precisely by their Standard Industrial Classification or SIC code. Financial ratios and industry benchmark data derived from the CSI industry groups are the most precise and accurate found anywhere. The CSI includes data from public companies in industries such as communications equipment, food processing, semiconductors, software technology, utilities and 65 others.
Global companies are well-represented in the CSI as the index includes 345 non-U.S. companies based in 43 different countries and territories around the world that have a stock exchange listing on either the NYSE or the Nasdaq. Data gathered from these companies, which are often the largest in their respective nations, lends a global influence and credibility to the CSI rankings and benchmarks.
Companies indexed and ranked in the CSI generally have a minimum market capitalization of $100 million and a trade accounts receivable that is at least 4% of revenue. 17% of the companies included in the CSI are based outside the United States led by China, which has 57 companies in the index. The Netherlands, Ireland and India also have nine companies in the CSI. In all, 28 different countries have at least three home-based companies represented in the index. CreditPulse publishes sovereign benchmarks for these 28 countries.
The credit standards of each company are defined by the following five equally weighted standards-based criteria:
CSI Scoring Factors
Bad debt allowance (BDA) - BDA is a standards measurement that provides insight into the credit and risk standards and management acuity level of a company. The BDA is a key indicator of how a company manages risk. It is directly affected by managerial components such as credit policy, accounting and control practices as well as corporate culture. BDA is also an expense item that directly impacts profitability. The industry and aggregate bad debt allowance benchmarks are available by assessing the CSI.
Days' sales outstanding (DSO) - DSO is an effeciency ratio that measures the average number of days in a given period for a company to turn its accounts receivable into cash. Companies that are efficient in collecting their receivables are generally efficient, well-structured and disciplined in other important areas as well. DSO remains the most accurate and widely used method for calculating A/R performance. This key measurement, however, varies widely among industries. DSO benchmarks for 70 industries are available by assessing the CSI.
Net cash from operations as a percent of revenue - Since the improvements made to cash flow reporting in 1987, few forms of financial data provide as much value in assessing the viability, managerial capacity and credit standards of a company more than operating cash. When compared directly with total revenue and then measured against the appropriate industry benchmarks, operating cash gives insight into the legitimacy of a company's revenue and its ability to turn revenue into cash. The industry and aggregate average and median ops cash to revenue percentage benchmarks are available by accessing the CSI online.
Current ratio - Current assets divided by current liabilities is a liquidity ratio long used by banks and creditors in determining credit worthiness. It is still relevant today despite the ongoing efforts by some in the accounting rules-making world to cloud the distinction between current and non-current. The working capital of a company represents the margin of current assets over current liabilities. The industry and aggregate average and median benchmarks for current ratio are available by accessing the CSI online.
Total assets divided by total liabilities - Also known as debts-to-assets, this balance sheet ratio is particularly well suited for measuring credit standards because it encompasses the entire balance sheet with the exception of equity, which is susceptible to speculation and manipulation. This ratio is critical because it reveals the degree to which debt, mainly long term debt, will impact the long-term prospects or solvency of a company. Typically, an inverse relationship exists between cash and debt. The industry and aggregate average and median benchmarks for debts-to-assets ratio are available by accessing the CSI online.
The index offers practitioners in credit, accounting, finance and many other areas of business and academia the following:
- Identification and understanding in real terms of the factors that constitute credit standards
- Accurate and unbiased aggregate and industry benchmarks
- Accurate and unbiased company benchmarks for over 2,100 global companies
- Credit scoring for public companies with a minimum market capitalization of $100 million
- Comprehensive industry groupings based on SIC codes
- First ever ranking of companies and industries based on credit standards
The Credit Standards Index of 2,082 publicly-traded companies takes benchmarking, statistical analysis, industry data and company data to a new level of accuracy and dependability.