Notes: The composite measure is based on a broad set of indicators along five dimensions: debt service capacity (measured by the interest coverage ratio, corporate savings and revenue generation); leverage/indebtedness (debt-toequity, net debt-to-EBIT and gross debt-to-income ratios); financing/rollover (ratio of short-term debt to long-term debt; quick ratio (defined as current financial assets divided by current liabilities); overall cost of debt financing and credit impulse (defined as the change in new credit issued as a percentage of GDP)); profitability (return on assets, profit margin and market-to-book value ratio) and activity (sales growth, trade creditors ratio and change in accounts receivable turnover).
Except for the overall cost of debt financing and GDP, all indicators are based on data from the ECB’s quarterly sector accounts. The overall cost of debt financing indicator is calculated as a weighted average of the costs of bank borrowing and market-based debt, based on their respective amounts outstanding.