Accounting Ratios

Other Cash Flow Financing Activities/Sales (%)

We penalise companies which a high level of other financing activities relative to their GICS industry peers. Other financing activities are non-traditional financing activities that require further investigation. These include financing activities from discontinued operations when separated from other activities, dividends paid to minority shareholders and dividends paid by subsidiaries, foreign exchange adjustments and changes in minority interests. For utilities, it includes issue/repurchase costs and discounts and premiums on reacquisition of debt.

Around 82% of companies reported other financing activities between 2010 and 2015 (Figure 97) and these averaged 0.4% of sales. REITs and real estate companies recognised significantly higher levels of other financing activities in excess of 2% of sales on average, as shown in Figure 98.

Our accounting screen is set to trigger a red flag when other financing activities/sales are above the 80th percentile (i.e. they are very high) relative to GICS industry peers.