§0Abstract
The R-Score is a company credit-risk measure built entirely from public records. It reads the filed accounts of a company, converts them into thirteen financial ratios, scores three components (profitability, asset quality and funding) and combines them with a nonlinear composite model. The result is a 0–100 score, mapped to a 1–10 risk rating, and adjusted by hard overrides for insolvency events that outrank any accounting figure.
The model was validated against an established commercial H-Score credit-risk benchmark: R² = 0.878, with 94% of predictions within 20 points. Around 3.4 million England & Wales companies carry a score. The service is free, and this document is published because a risk score you cannot audit is marketing, not intelligence.
§1Scope & coverage
The score covers companies registered in England & Wales. Around 5.1 million are registered, of which approximately 3.4 million carry a score. Companies registered in Scotland (numbers beginning SC), Northern Ireland, or overseas are not covered.
A company is scored from its most recent filed accounts. A company without enough usable filed data shows as Unscored on the profile; its court and insolvency records are still displayed. Scoring is a data gate, not a paywall. There is no paid tier.
§2Inputs & sources
Four primary public sources feed the system. None of the inputs are resold bureau data.
| Source | What it provides | Used for |
|---|---|---|
| Companies House | Filed accounts (iXBRL), filing deadlines, company status, registered details | The financial core: all thirteen ratios; overdue-filing signals |
| HMCTS court records | County Court Judgments | The CCJ register on each profile; risk-rating adjustments |
| The Gazette | Winding-up petitions, insolvency notices, dissolution events | The hard override (§6) and event timeline |
| Charges register | Mortgages and security granted over company assets | Secured-debt picture on each profile |
§3Extraction & eligibility
Filed accounts arrive as iXBRL documents. The extraction pipeline reads each filing and pulls structured fields: turnover, operating profit, profit before tax, net assets, cash, borrowings, creditors, stock, debtors and the audit flags. From these raw fields the pipeline computes thirteen ratios: operating margin, gross margin, ROCE, return on net worth, return on assets, interest cover, current ratio, acid test, cash ratio, gearing, debt-to-equity, leverage, and debtor/creditor days.
Two eligibility gates decide whether a company gets a score:
- Extraction gate. A filing must yield at least three extracted fields. Below that, the data is too thin to trust and the company is excluded from scoring for that period.
- Metric gate. At least three of the component metrics must be computable. Companies under this threshold are recorded as Unscored rather than given a guess.
§4Component scoring
Each ratio is converted to a 0–100 sub-score by a piecewise curve fitted from observed company data: strong readings score high, weak readings score low, with thresholds where distress typically begins. The sub-scores are then combined into three components with fixed internal weights. Within a component, weights renormalise over whichever metrics are available, so a missing ratio does not distort the result.
Profitability — component weight 42%
Whether the trade itself makes money.
| Metric | Weight | What it measures |
|---|---|---|
| Operating margin | 0.30 | Profit left from each £1 of sales after day-to-day costs |
| Pre-tax margin | 0.20 | Profit before tax relative to turnover |
| ROCE | 0.20 | Return on capital employed |
| Return on net worth | 0.15 | Return generated on shareholders' funds |
| Return on assets | 0.15 | Return generated on total assets |
Asset quality — component weight 38%
Whether the balance sheet can meet its obligations.
| Metric | Weight | What it measures |
|---|---|---|
| Current ratio | 0.35 | Short-term assets against short-term liabilities |
| Acid test | 0.25 | Current ratio excluding stock, the stricter liquidity test |
| Cash ratio | 0.20 | Cash alone against short-term liabilities |
| Debtor days | 0.10 | How long customers take to pay (lower is better) |
| Creditor days | 0.10 | How long the company takes to pay suppliers |
Funding — component weight 20%
How much the company leans on borrowed money.
| Metric | Weight | What it measures |
|---|---|---|
| Gearing | 0.40 | Borrowings relative to shareholders' funds |
| Debt-to-equity | 0.30 | Total debt against equity |
| Interest cover | 0.30 | How many times profit pays the interest bill (below 1x: profit does not service the debt) |
§5Composite model
The three components combine in a nonlinear model. A simple weighted average would let one strong component hide two weak ones; a company with healthy profit but a collapsing balance sheet should not score like a healthy company. The composite therefore carries two corrective terms: a geometric mean that rewards balance across all three components, and a minimum-component penalty that drags the score down when any leg is weak.
The linear weights come from the regression fit against the benchmark; the geometric-mean term carries the positive contribution of balanced funding. Two further behaviours are built in:
- Weakness penalty. Any component below 10 multiplies the result by a penalty factor of (1 − 0.5 × shortfall), where shortfall is how far below 10 it sits. A component near zero roughly halves the composite.
- Missing components. If one component is unavailable, the model falls back to a weighted average of the rest, with the same weakness penalty. If only one component exists, it is reported alone, as there is not enough signal to do more.
§6Overrides & guards
Four rules correct the pure-arithmetic result where arithmetic would mislead.
6.1 Negative equity → funding forced to zero
If net assets are zero or negative, liabilities exceed assets: the company is technically insolvent. The funding component is set to 0 regardless of what the ratios produced, because gearing ratios become meaningless once equity is wiped out.
6.2 The asset-cushion floor
The minimum-component penalty would otherwise push an asset-rich company with one catastrophic loss year to the bottom of the scale. That overstates the danger if the equity cushion can absorb years of losses at the current rate. When all of the following hold (net assets positive, current ratio at least 1.0, asset component at least 35, and net assets at least three times the annual loss), the score is floored between 15 and 22 depending on loss runway (three years of runway floors at 15, eight or more at 22). The company reads as High Risk (watch closely), not Distressed.
6.3 Winding-up petition → rating forced to 10
An active winding-up petition means a creditor has asked the court to liquidate the company. No accounting figure outranks that event: the risk rating is set to 10 (Distressed) whatever the accounts say. Other terminal insolvency events apply the same override at the API layer, alongside status, CCJ and overdue-filing adjustments.
6.4 Data-quality score
Every profile carries a separate data-quality score so the reader can see how much the filing supports the number. It starts from the share of the thirteen metrics that were extracted, then takes penalties: −10 for a going-concern uncertainty flagged by the auditor, −5 for a qualified audit opinion, and up to −15 where extraction was thin.
§7Risk rating scale
The 0–100 score maps to a 1–10 rating in ten-point bands, with the top band narrower to separate the strongest companies. A score of 25 or below also flags the profile as a warning area.
| Score range | Rating | Label |
|---|---|---|
| 85–100 | 1 | Very Low Risk |
| 75–84 | 2 | Very Low Risk |
| 65–74 | 3 | Low Risk |
| 55–64 | 4 | Low Risk |
| 45–54 | 5 | Moderate Risk |
| 35–44 | 6 | Moderate Risk |
| 25–34 | 7 | High Risk |
| 15–24 | 8 | High Risk |
| 8–14 | 9 | Critical Risk |
| 0–7 | 10 | Severe Risk |
§8Sector context
Raw scores are only half the picture, because normal financial structure differs by trade. A thin operating margin is routine in distribution and alarming in software. After scoring, each company's score is ranked against other companies in the same sector group and published as a sector percentile on the profile. The percentile answers the question the raw score cannot: is this company weak for its trade, or is the trade itself thin?
§9Validation
The composite model was validated against an established commercial H-Score credit-risk benchmark across a sample of companies with known outcomes:
| Measure | Result |
|---|---|
| Coefficient of determination (R²) | 0.878 |
| Predictions within ±20 points of benchmark | 94% |
| Simpler linear variant (for reference) | R² = 0.828 |
The nonlinear composite outperforms the linear variant precisely because of the balance terms described in §5: real failures are rarely uniform across all three components.
§10Limitations
- As fresh as the filings. Companies have up to nine months after their year-end to file accounts. Live signals (CCJs, winding-up petitions, overdue filings) close most of that gap but not all of it.
- Not a guarantee. The score summarises public-record risk. No score predicts every failure; strong-scoring companies can fail suddenly.
- Not a lending decision. It is evidence for your own judgement, not a substitute for professional credit, legal or investment advice.
- Geography. England & Wales companies only.