The relative scores analyze a certain aspect of the company but always in relation to the size, country or industry to which that company belongs. They give an idea of the situation of the company, in relation to that accounting/financial or economical aspect, within its country, industry or companies of the same size.
An intuitive way of understanding the utility and use of these relative scores would be to consider the analogy of a test result within a class. The absolut score would be equivalent, in this situation, to the grade obtained by each of the students. The relative score would be equivalent to a measure of the grade of each student in relation to the grades of the rest of the class. Let's look at an example:
- Suppose that the test are graded with a score from 0 to 10 and that the whole class has obtained a grade of 1 except a single student who has obtained a 4. If we see this last student's grade individually, as the absolute scores do, we can clearly see that it has failed the test (his grade is below 5). But this absolute score is not providing us information the information that this 4 is the best grade by far of the whole class.
Gradement calculates the relative grade/scores by converting the 4 to an 8 and all the 1's to a grade of 2. Now, this relative grade of 8 does not give us information on whether the student has passed or failed the test (for that we must use the absolute grade/scores) but this relative grade of 8 tells us that the student's note is well above the rest of his class's grades without having to individually inspect the grades of all the other students.
The relative scores can therefore be seen as an indication of the relative position of the company with respect to the corresponding score in relation to the other companies in the same category (size, industry and/or country).
Suppose that a given company has the following values in relation to the solvency score:
- Solvency score = 7
- Solvency score relative to industry = 3
We see, first of all, that the company is solvent, since the absolute solvency score has a value of 7. However, that value of 3 in the solvency score relative to its industry it's an indication that, although solvent (because of the absolute score value), it is less solvent than the majority of the rest of companies in the same industry. This relative note of 3 gives us an indication that approximately 70% of the companies in its industry present a higher solvency than the company to which the relative score value belongs.
Gradement calculates relative scores for seven categories, three main ones and other four as a combination of these three ones:
- Country or geographical area
- Area and size
- Zone and industry
- Industry and Size
- Zone, industry and size