Reference
What the numbers mean
Every term WylthIQ uses, explained without assuming you have read a balance sheet before. Nothing here is advice — it is just vocabulary.
Guides
Longer walkthroughs, each with a worked example and links to real companies
- How to analyze a company's financesA step-by-step way to read any public company's accounts: what it does, whether it makes money and cash, what it owes, and how it is valued.
- How to read a balance sheetWhat a balance sheet shows, what assets, liabilities and equity include, the ratios built from it, and what it cannot tell you — with a worked example.
- How to read an income statementHow revenue becomes profit, line by line: gross, operating and net income, margins, earnings per share and one-off items — with a worked example.
- What is free cash flow?Free cash flow is the cash a business generates after paying for its own upkeep and investment. How it is calculated, why it matters, and where it misleads.
- What is the Piotroski F-Score?Nine yes-or-no tests of whether a company's finances improved over the year, from a 2000 study by Joseph Piotroski. The tests, the scale, and its limits.
- What is the Altman Z-Score?A model from 1968 combining balance-sheet and income ratios to describe how close a company looks to distress. The formula, the zones, the variants.
- What is the Beneish M-Score?An eight-ratio model from 1999 that screens accounts for patterns linked to overstated earnings. How it works, and why a flag is not proof.
- What is the P/E ratio?Price to earnings compares a company's share price with its profit. How it is calculated, what a high or low P/E can reflect, and where it misleads.
- A stock screener built on financial healthScreen US and Canadian companies on financial health, profitability, growth, debt and accounting quality, using scores computed from their SEC filings.
New to financial analysis?
Eight questions to work through on any company page, with where each one is answered
- 1.
What does the company do?
Every figure means something different depending on the business. Start with what it sells, to whom, and whether sales recur.
- 2.
Is it profitable?
Look at operating and net margins across several years rather than one.
- 3.
Is it growing?
Compare revenue with a year and three years earlier, and check whether acquisitions supplied the growth.
- 4.
Does it generate cash?
Operating cash flow should broadly keep pace with profit. Free cash flow is what remains after investment.
- 5.
How much debt does it have?
Net debt and interest cover say more than total liabilities, which include ordinary bills.
- 6.
How is it valued?
A multiple needs a comparison: the company's own history, or similar companies.
- 7.
What changed?
Set the latest year and quarter beside the ones before, then read the company's own explanation in its filing.
- 8.
What risks should I investigate?
Warning signs, the accounting and distress models, and the filing's own risk factors all say where to look harder.
The basics
The statement lines every other figure is built from
- Net income (profit)
What's left after every cost is paid.
The bottom line. Revenue minus all costs, interest and taxes. Negative net income means the company lost money over the period.
- Assets
Everything the company owns.
Cash, buildings, equipment, inventory, and money owed to it by customers. Assets are what would be left to sell or collect if it stopped trading.
- Liabilities
Everything the company owes.
Loans, unpaid supplier bills, and obligations to deliver things already paid for. Not all liabilities are borrowings — a large chunk is often just ordinary trade credit.
- Equity
What would be left for shareholders.
Assets minus liabilities. If the company sold everything and paid off every debt, equity is what owners would share. Negative equity means debts exceed everything owned.
- Operating cash flow
Actual cash the business generated.
Profit is an accounting figure and involves judgement calls; cash flow is harder to massage. When profit is healthy but cash flow is not, it is worth asking why.
Metric guide
What each figure is, how it is worked out, why it matters, where it misleads, and where it comes from
- Revenue
Everything customers paid the company over the period, before any costs come out.
How it is calculated. Reported directly by the company as its revenue, sales or turnover line.
Why it matters. It is the top line every other figure is carved out of. Growth here is the raw material for growth everywhere else.
Limitations. It says nothing about profit — a shop that sells $1M of goods has $1M of revenue even if those goods cost it $1.2M — and an acquisition can add revenue without the business itself growing.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Gross margin
The share of each sale left after the direct cost of producing what was sold.
How it is calculated. Gross profit divided by revenue. Where a company tags no gross profit, it is revenue less cost of revenue.
Why it matters. It shows pricing power and production cost before overheads. It is usually the first place pressure on prices shows.
Limitations. Industries differ enormously — software runs near 80%, supermarkets near 25% — so it only compares within an industry. Some companies, banks among them, report no cost of revenue at all.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Operating margin
The share of each sale left after running the business, before interest and tax.
How it is calculated. Operating income divided by revenue.
Why it matters. It separates how the business performs from how it is financed and taxed.
Limitations. Companies draw the operating line differently, and restructuring or impairment charges can land inside it in one year and not the next.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Profit margin
The share of each sale that survives to the very end, after every cost, interest payment and tax.
How it is calculated. Net income divided by revenue.
Why it matters. It is what the business ultimately keeps, and the figure growth in sales has to translate into.
Limitations. One-off items — a legal settlement, a tax charge, selling a division — move it without the business changing. Supermarkets run on thin margins and software companies on very wide ones, so it only compares within an industry.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Free cash flow
Cash left after running the business and paying for the buildings and equipment it needs.
How it is calculated. Cash from operations minus capital expenditure, with capital expenditure taken as an outflow whichever sign the filer tagged it with.
Why it matters. It is the cash genuinely available for dividends, buybacks or paying down debt, and it is harder to flatter than profit.
Limitations. Lumpy: a year of heavy investment can make a healthy company look cash-poor. Stock-based pay is not a cash cost, so it flatters this figure.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Free cash flow margin
The share of each sale that became spendable cash.
How it is calculated. Free cash flow divided by revenue.
Why it matters. It compares cash generation between companies of different sizes.
Limitations. It inherits every limitation of free cash flow, including the swings from years of heavy investment.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Earnings per share
The profit attributable to each share.
How it is calculated. Net income divided by the shares in issue at the period end.
Why it matters. It turns a company-sized profit into one a single holding can be measured against, and it is what the P/E ratio is built on.
Limitations. A company's own reported EPS divides by the average share count across the year, so this sits close to it rather than exactly on it. Buybacks raise it with no growth in profit at all.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Net debt
What the company would still owe if it used every dollar of cash to repay its borrowings.
How it is calculated. Long-term plus short-term debt, minus cash and cash equivalents. Negative means more cash than debt.
Why it matters. It is a better measure of borrowing than total liabilities, which include ordinary supplier bills and payments received in advance.
Limitations. Cash here excludes short-term investments, where cash-rich companies keep much of their money, so it can overstate net debt. It is not meaningful for banks, whose deposits are their raw material.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Debt to equity
How much of the company is funded by what it owes rather than by its owners.
How it is calculated. Total liabilities divided by shareholders' equity.
Why it matters. Heavy reliance on borrowed money magnifies both good and bad years.
Limitations. It uses total liabilities, not just borrowings. Buybacks shrink equity and inflate the ratio without new debt, and negative equity makes the figure meaningless.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Current ratio
Whether the bills due within a year are covered by what can be turned into cash within a year.
How it is calculated. Current assets divided by current liabilities.
Why it matters. Below 1 means more falls due this year than is readily available to pay it.
Limitations. Plenty of healthy companies run below 1 because customers pay them before suppliers must be paid. Banks and insurers present no current split at all.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Interest cover
How many times over operating profit covers the interest bill.
How it is calculated. Operating income divided by interest expense.
Why it matters. A company can carry debt for decades; it cannot survive long without earning its interest.
Limitations. A company with no interest expense has no ratio, which is a different statement from a poor one. Interest rates resetting on floating-rate debt can change it quickly.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Price to earnings (P/E)
What the market pays for each dollar of the company's yearly profit.
How it is calculated. Market value divided by net income — equivalently, share price divided by earnings per share.
Why it matters. It is the most common shorthand for how much growth the market is already expecting. Two companies each earning $1 a share, priced at $10 and $50, have P/Es of 10 and 50 — the market is paying five times as much for the same profit.
Limitations. It cannot be calculated for a company that loses money, one-off items distort it, and it is backward-looking: it uses last year's profit against today's price.
Where it comes from. Market value from the latest share price, whose timing is labelled beside it at the top of the page, and the other figure from the company's latest annual report on SEC EDGAR.
- Price to sales (P/S)
What the market pays for each dollar of yearly sales.
How it is calculated. Market value divided by revenue.
Why it matters. It works for a company with no profit yet, where a P/E does not exist.
Limitations. It ignores whether those sales make any money, so two companies with the same P/S can be in very different health.
Where it comes from. Market value from the latest share price, whose timing is labelled beside it at the top of the page, and the other figure from the company's latest annual report on SEC EDGAR.
- Price to book (P/B)
What the market pays for each dollar of the company's net worth on its balance sheet.
How it is calculated. Market value divided by shareholders' equity.
Why it matters. It is a common reference point for banks and asset-heavy businesses, whose balance sheets carry most of their value.
Limitations. Brands, software and research rarely appear on a balance sheet, so asset-light companies look expensive on this measure, and buybacks shrink book value.
Where it comes from. Market value from the latest share price, whose timing is labelled beside it at the top of the page, and the other figure from the company's latest annual report on SEC EDGAR.
- Price to free cash flow
What the market pays for each dollar of cash the company actually generates.
How it is calculated. Market value divided by free cash flow, shown only when free cash flow is positive.
Why it matters. Cash is harder to flatter than profit, so this is a useful check on a P/E.
Limitations. Free cash flow swings with investment cycles, so one year can make the ratio look unusually high or low.
Where it comes from. Market value from the latest share price, whose timing is labelled beside it at the top of the page, and the other figure from the company's latest annual report on SEC EDGAR.
- Return on equity
The profit earned on what the owners have put into the company.
How it is calculated. Net income divided by shareholders' equity.
Why it matters. It shows how effectively the owners' money is being used.
Limitations. Debt and buybacks shrink equity, so very high figures often come from a heavily borrowed balance sheet rather than a better business. Negative equity makes it meaningless.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Return on assets
The profit earned on everything the company owns.
How it is calculated. Net income divided by total assets.
Why it matters. Unlike return on equity, borrowing cannot inflate it.
Limitations. Banks and insurers hold enormous asset bases and naturally score low, and asset-light businesses naturally score high.
Where it comes from. The company's latest annual report — a 10-K, or a 40-F for a Canadian filer — read from SEC EDGAR's structured XBRL data.
- Piotroski F-Score
Nine yes-or-no checks of whether a company's finances improved over the year.
How it is calculated. One point each for positive profit, positive cash flow, rising return on assets, cash flow above profit, falling debt, a rising current ratio, no new shares, a rising gross margin and rising asset turnover.
Why it matters. Published by Joseph Piotroski in 2000 as a quick test of financial strength and direction. 8 or 9 describes strong and improving finances; 0 to 2 weak and deteriorating ones.
Limitations. A check that needs a figure the company did not report is skipped, so the score is shown out of fewer than nine rather than counted as a failure. It measures direction, not size.
Where it comes from. Computed by WylthIQ from the company's two latest annual reports on SEC EDGAR.
- Altman Z-Score
A published model of how far a company sits from financial distress.
How it is calculated. A weighted sum of working capital, retained earnings, operating profit, market or book value and sales, each against total assets. The weights depend on which of Altman's variants applies. On the original model, above 2.99 is the safe zone, 1.81 to 2.99 grey, and below 1.81 distress; each variant has its own thresholds.
Why it matters. Published by Edward Altman in 1968, it remains one of the most widely used measures of bankruptcy risk.
Limitations. Fitted on manufacturers, so WylthIQ uses the non-manufacturing variant elsewhere, and omits it for banks and insurers entirely. It is a statistical screen, not a forecast.
Where it comes from. Computed by WylthIQ from the company's latest annual report on SEC EDGAR and, where available, its market value.
- Beneish M-Score
A statistical screen for accounting patterns resembling those of companies that later restated earnings.
How it is calculated. Eight ratios comparing this year with last — receivables, margins, asset quality, sales growth, depreciation, overheads, leverage and accruals — combined with published weights.
Why it matters. Published by Messod Beneish in 1999. Above −1.78 flags patterns worth reading the filings for.
Limitations. A flag is a prompt to read the filings, never evidence of wrongdoing; plenty of honest, fast-changing companies trip it. It needs two years of figures and is not meaningful for banks.
Where it comes from. Computed by WylthIQ from the company's two latest annual reports on SEC EDGAR.
- Dividend yield
What the company paid out over the last twelve months, as a share of today's price.
How it is calculated. Dividends per share over the trailing twelve months divided by the current share price.
Why it matters. It shows the income a holding produced at today's price.
Limitations. It is trailing, not a promise: a dividend can be cut, and a falling price raises the yield on its own.
Where it comes from. Dividend payments per share from the price provider's payment history, against the latest share price.
- Financial health score
WylthIQ's summary of four questions about the business: is it profitable, is it growing, how much debt does it carry, and are there accounting red flags.
How it is calculated. Each question is rated good, mixed or weak and scored 10, 6 or 2; the score is the average of the questions that could be assessed.
Why it matters. It turns four separate answers into a single starting point, with the reasoning shown beside it.
Limitations. A question with too little data is left out rather than guessed, so a score can rest on fewer than four answers. Valuation is deliberately excluded: an expensive share price says nothing about the business underneath.
Where it comes from. Computed by WylthIQ from the company's latest annual report on SEC EDGAR.
See these figures on a real company — Apple or Royal Bank of Canada — compare two side by side, or screen for companies that pass them.
Why some scores say “not meaningful for banks”
A deliberate omission, not missing data
The Altman and Beneish models were built by studying industrial and retail companies. Banks and insurers are structurally different in two ways that break them.
First, a bank's balance sheet has no split between short-term and long-term items, so there is no working capital to measure — several inputs simply do not exist. Second, banks are supposed to be highly leveraged: taking deposits and lending them out is the business. A model built to read heavy borrowing as a danger sign will label every healthy bank as distressed.
Rather than print a confident number that is meaningless, WylthIQ omits those scores for financial companies and says so. The rest of the analysis — profitability, growth, accounting quality — still applies.
Where the figures come from
All financial data is read from SEC EDGAR, the US regulator's official filing system. These are the same documents the company's auditors signed off on. Every stock page links directly to the filing each figure was taken from, so you can always check.
Canadian companies appear when they cross-list on a US exchange and file a 40-F, which most large Canadian firms do. They report under IFRS rather than US accounting rules, and WylthIQ reads both.
Figures come from annual reports, and from quarterly reports for companies that file them in the US, so they can be several months old. Share prices are separate and much fresher — each page labels exactly how fresh.
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