Piotroski F-Score

How is the Piotroski or F-Score calculated? Profitability 1. Return on assets (ROA) Net income before extraordinary items for the year divided by total assets at the beginning of the year. Score 1 if positive, 0 if negative 2. Cash flow return on assets (CFROA) Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year. Score 1 if positive, 0 if negative 3. Change in return on assets Compare this year™s return on assets (1) to last year™s return on assets. Score 1 if it™s higher, 0 if it™s lower 4. Quality of earnings (accrual) Compare Cash flow return on assets (2) to return on assets (1) Score 1 if CFROA>ROA, 0 if CFROA Funding 5. Change in gearing or leverage Compare this year™s gearing (long-term debt divided by average total assets) to last year™s gearing. Score 1 if gearing is lower, 0 if it™s higher. 6. Change in working capital (liquidity) Compare this year™s current ratio (current assets divided by current liabilities) to last year™s current ratio. Score 1 if this year™s current ratio is higher, 0 if it™s lower 7. Change in shares in issue Compare the number of shares in issue this year, to the number in issue last year. Score 1 if there is the same number of shares in issue this year, or fewer. Score 0 if there are more shares in issue. Efficiency 8. Change in gross margin Compare this year™s gross margin (gross profit divided by sales) to last year™s. Score 1 if this year™s gross margin is higher, 0 if it™s lower 9. Change in asset turnover Compare this year™s asset turnover (total sales divided by total assets at the beginning of the year) to last year™s asset turnover ratio. Score 1 if this year™s asset turnover ratio is higher, 0 if it™s lower Evaluation Piotroski or F-Score = 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9 Good or high score = 8 or 9 Bad or low score = 0 or 1