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FSA Working Group

"The FSA WG has produced the News release Profitability, Equity Capitalization and Net Worth at Risk (Updated with 2015 data).

Financial Statement Analysis Working Group (WG FSA) conducted a study in 2013 to analyze profitability and equity capitalization in six European countries for manufacturing, construction and trade sector focusing on the economic crisis in the years 2008-2009 and one year later. The group introduced the concept of “Net Worth at Risk” (NWaR) as a kind of stress test evaluate if companies in sector, size and country classification are enough capitalize to afford a period of crisis with possibility of having heavy losses. NWaR is the share of cumulative losses (as a percentage of total assets) that companies may have to face with a certain level of confidence calculated over a given period of time. Two NWaR approaches are used: conditional and unconditional NWaR at three confidence level: 95%, 90% and 80%. The first two represent rather worst-case scenarios and the last displays a rather moderate loss scenario.

This note is the extension of the former study within the time span from 1987 to 2015 with Spanish, Italian and Turkish data. Likewise the former one, this study aims to create a tool for the stress test to evaluate the financial performance of the companies in terms of profitability and equity capitalization.”

Link to the FSA WG publication section