How to Make a Complex Corporate Finance Indicator Simpler

Quality of life or listed company rating are examples of complex variables which are not directly observed. Complex variables may be studied through a composite indicator based on other variables (partial components) that are observed and directly measured. The focus of the paper is on the reduction of the number of partial indicators under consideration to construct a complex indicator. An empirical solution is proposed. The steps of the procedure are presented and a practical application is discussed. More precisely, the ranking of listed companies for what concern their ability to meet short and long term debt obligations (the liquidity issue) is addresses