Fulmer H Factor / Score

View Financial Glossary Index

Definition

The Fulmer H Factor (also frequently called Fulmer H Score) is a bankruptcy classification model, based on the 1984 paper "A Bankruptcy Classification Model for Small Firms".

According to the model, a firm should be classified as bankrupt if the score is below zero and should be classified as not bankrupt if the score is above zero.

Note that this is a probablistic model, so classifications will not be accurate 100% of the time. That said, the model can certainly be used as a guide to understand which stocks may be safer, and which may be less safe.

Scores lower than zero are classified as "failed".

Formula

H Factor = 5.528 * X1 + 0.212 * X2 + 0.73 * X3 + 1.27 * X4 - 0.12 * X5 + 2.335 * X6 + 0.575 * X7 + 1.083 * X8 + 0.894 * X9 - 6.075

Where:
X1 = Avg Retained Earnings / Average Total Assets
X2 = Revenues / Average Total Assets
X3 = EBIT / Total Equity*
X4 = Cash Flows from Operations / Average Total Debt**
X5 = Average Total Debt / Total Equity*
X6 = Total Current Liabilities / Average Total Assets
X7 = log(Average Tangible Assets)
X8 = Average Working Capital / Average Total Debt**
X9 = log(EBIT) / Interest Expense***

* Total Equity = (Market Cap + Preferred Stock Equity + Noncontrolling Interests)
** If Average Total Debt is Zero, this quantity is assumed to be zero.
*** If Interest Expense is Zero, this quantity is assumed to be zero.

Are you an investing professional?

Click here to request a live demo of YCharts Professional, our premium suite of tools and data.
Learn more about our professional products. Call (866) 965-7552 or email sales@ycharts.com

Advertisement

{{root.upsell.info.feature_headline}}.

{{root.upsell.info.feature_description}}

Please note that this feature is only available as an add-on to YCharts subscriptions.


Please note that this feature requires full activation of your account and is not permitted during the free trial period.

Start My Free Trial {{root.upsell.info.call_to_action}} No credit card required.

Already a subscriber? Sign in.