Methodology

How Risk Scores Work

DebtCanary assigns each company a risk score from 1 to 10 based on four financial metrics derived from SEC filings. A score of 1 indicates the lowest refinancing risk, while 10 indicates the highest. The composite score is a weighted average of four sub-scores, each of which evaluates a different dimension of a company's debt health.

Scores are grouped into three risk levels:

• Low Risk (score 1-3): The company has strong debt coverage and a well-distributed maturity schedule.
• Medium Risk (score 4-6): Some areas of concern but generally manageable debt levels.
• High Risk (score 7-10): Significant near-term refinancing pressure, weak coverage ratios, or high leverage.

The Four Components

1. Near-Term Maturity Concentration (30% weight)

This measures what percentage of a company's total scheduled debt maturities come due in the next 12 months. A high concentration means the company faces a "maturity wall" and must refinance or repay a large portion of its debt soon. This is the most heavily weighted component because near-term pressure is the primary driver of refinancing risk.

2. Interest Coverage Ratio (25% weight)

Interest coverage measures how many times a company's operating income covers its interest expense. It answers the question: "Can this company afford to service its debt?" A ratio below 1.0 means the company is not generating enough operating income to cover interest payments, a serious warning sign.

Formula: Interest Coverage = Operating Income / Interest Expense

3. Debt-to-Equity Ratio (25% weight)

Debt-to-equity measures a company's financial leverage by comparing its total long-term debt to shareholders' equity. A higher ratio indicates more aggressive use of debt financing. While some industries naturally operate with higher leverage, extreme ratios signal potential distress if earnings decline.

Formula: Debt-to-Equity = Long-Term Debt / Stockholders' Equity

4. Cash Coverage of Near-Term Debt (20% weight)

This component measures whether a company has enough cash or cash-generating ability to cover debt coming due in the next 12 months. It uses cash and cash equivalents when available, falling back to cash from operations. A ratio above 1.0 means the company could theoretically cover near-term maturities from existing resources without needing to refinance.

Formula: Cash Coverage = Cash (or Cash from Ops) / Year 1 Maturities

Composite Score Calculation

The final risk score is computed as a weighted average of available sub-scores. If a component cannot be calculated due to missing data, its weight is redistributed proportionally among the remaining components. The raw weighted average is clamped to the range 1-10 and rounded to the nearest integer.

Formula: Score = (0.30 × Maturity + 0.25 × Coverage + 0.25 × D/E + 0.20 × Cash) / Total Weight

Data Source: SEC EDGAR XBRL

All financial data is sourced from the SEC's EDGAR system, specifically from the XBRL (eXtensible Business Reporting Language) structured data that public companies are required to file. DebtCanary uses the Company Concept API to retrieve standardized financial facts from 10-K (annual report) filings.

The XBRL data includes structured maturity schedules reported under US GAAP concepts such as LongTermDebtMaturitiesRepaymentsOfPrincipalInNextTwelveMonths. When standard maturity bucket data is not available, the system falls back to aggregate current and non-current long-term debt figures.

Data is fetched periodically and cached locally. The fetch date shown on each company page indicates when the data was last retrieved from EDGAR. Filing dates indicate when the company last submitted the relevant report to the SEC.

Data Completeness Flags

Not all companies report all of the financial concepts used in the scoring model. DebtCanary tracks data completeness and displays it alongside each company's score to help users assess reliability.

What Each Metric Means

Total Long-Term Debt

The total amount of debt obligations with maturities exceeding one year, as reported on the company's balance sheet. This is the primary measure of a company's debt burden.

Maturity Schedule

A breakdown of when scheduled principal repayments are due, typically reported in annual buckets (Year 1 through Year 5) plus an aggregate "thereafter" amount. Companies report this in the notes to their financial statements.

Operating Income

Revenue minus operating expenses (cost of goods sold, selling expenses, administrative expenses, etc.) but before interest and taxes. This measures the company's core profitability and its ability to service debt from business operations.

Interest Expense

The cost of servicing debt, including interest paid on bonds, credit facilities, and other borrowings. This is a fixed obligation that must be met regardless of business performance.

Cash and Cash Equivalents

Highly liquid assets that can be readily converted to known amounts of cash. This represents the company's immediately available financial cushion for meeting short-term obligations.

Stockholders' Equity

The residual interest in the company's assets after deducting liabilities. Also known as book value or net assets. A negative equity value typically indicates the company has accumulated losses exceeding its contributed capital.