I’ll consider Orchard Funding’s financial stability by firstly looking at its vulnerability to financial distress and secondly it propensity to generate cash year by year.
In 2000 Joseph Piotroski published research looking into the question of whether you could take a bunch of value shares and then separate out the strong from the weak using accounting ratios and measures.
The nine factors, taken as a whole, indicate where a company is along the spectrum, ranging from showing great improvements to its financial position at one end to exhibiting increasing financial distress at the other.
If the firm is profitable and produces positive cash flow it has a capacity to generate funds internally. A positive earnings trend suggests an improvement in the firm’s ability to generate positive future cash flows.
Measuring changes in capital structure (debt:equity ratio) and firm’s ability to meet future debt service obligations.
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