e financing risk. Porporato & Sandin use the variable interest payments/EBIT for measuring the debt costs. The variable shows how much of the e before tax and interest Рis spend to finance the debt. This variable also shows a clear trend when firms approach bankruptcy. РLiquidity РThe ratio used in all five papers to measure liquidity is the current ratio, showing the relation between current liabilities and current assets (with slight differences in the definition). Instead of the current ratio, a liquidity ratio setting the difference between current assets and current liabilities, also defined as working capital, into relation with total assets could be used. РFigure 2: Development of working capital / total assets ratioРData source: Altman (1968) and Ohlson (1980); author’s illustratio
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