Credit Worthiness Index formula is as follows:

CWI = 1.5*X1 + 0.08*X2 + 10*X3 + 5*X4 + 0.3*X5 + 0.1*X6

X1 - Cash flow / Borrowed capital
X2 - Total assets / Borrowed capital
X3 - Profit (before tax) / Total assets
X4 - Profit (before tax) / Total sales
X5 - Inventory / Total sales
X6 - Total sales / Total assets


The Credit Worthiness Index is used mainly in Central European countries, such as Austria, Germany or Switzerland.

The index uses the values of six ratios. Each of them is assigned a weight, with the ROA (Return On Total Assets) indicator having the greatest weight, the profit-sharing ratio of the company having the second largest weight, and lower weights assigned to the other indicators.


Summary

 ResultSubjectRating
  CWI  >= 3 creditworthy Extremely good economic situation
   2 <= CWI  <  3 creditworthy Very good economic situation
   1 <= CWI  <  2 creditworthy Good economic situation
   0 <= CWI  <  1 creditworthy Problematic economic situation
  -1 <= CWI  <  0 bankrupt Bad economic situation
  -2 <= CWI  < -1 bankrupt Very bad economic situation
  CWI  < -2 bankrupt Extremely bad economic situation

The critical value for deciding whether a company is bankrupt or creditworthy is 0. The higher the index value of the analyzed company, the better its financial situation can be assessed.

The longer-term persistence of the resulting index value above 1 (inclusive) is positive.