Overview
Asset Quality Index (AQI), is a core indicator used to evaluate financial condition and operating performance. Quarterly (Q) scope increases short-term volatility visibility.
Formula
(1 - (Current Assets + Property, Plant & Equipment) / Total Assets) current period / (1 - (Current Assets + Property, Plant & Equipment) / Total Assets) prior period
How to Interpret
High Value
A sustained high Asset Quality Index (AQI) can shift expectations around the firm’s cost of capital.
Low Value
If Asset Quality Index (AQI) remains depressed, investors may revise forward assumptions downward.
Where It Is Used
Asset Quality Index (AQI) should be paired with at least one complementary quality metric in decision filters.