Accounting Ratios

Profit/Loss from Affiliates/Operating Income (%)

We penalise companies where investments in affiliates (associates, affiliates and joint ventures) account for a large portion of shareholders’ equity. Around half of all companies have investments in affiliates although these are typically small, equating to just 3% of equity. In general, property companies have higher exposure to affiliates than other sectors, presumably to reflect collaboration on large projects. Under our accounting screen a red flag is triggered when affiliates/equity exceed the 80th percentile relative to global peers (13% of equity). A red flag is also triggered when affiliates/equity increase at an unusually large rate over 1 and 3 years. Again, this is when the increase exceeds the 80th percentile relative to global peers.