1.

Define the Piotroski F-Score and discuss the underlying arguments behind it
2. Identify the variables/ratios used in the computation of Piotroski F-Score and
highlight the intuition behind including these variables/ratios
3. Choose the country and download the data (from 2010 onwards) required to
compute the Piotroski F-Score for every firm in that country
4. Compute the Piotroski F-Score for every firm (in every year)
5. At the start of every year, group the firms into three portfolios based on last year’s
Piotroski F-Score
6. Compute the performance measures for each portfolio and compare them with the
performance of market

The variables/ratios used in the computation of the Piotroski F-Score include:

Profitability metrics: Return on assets (ROA), operating cash flow, and gross margin.
Leverage and liquidity ratios: Debt-to-equity ratio and current ratio.
Operating efficiency metrics: Asset turnover and gross margin.

Canada stock market: TMX Money (TSX Toronto stock exchange), Bloomberg, Yahoo
Finance Canada, The Canadian Securities Exchange (CSE) – national stock exchange of
Canada

Piotroski, J. D. (2000). Value Investing: The Use of Historical Financial Statement Information
to Separate Winners from Losers. Journal of Accounting Research, 38, 1–41.
https://doi.org/10.2307/2672906

As part of an investing strategy, applying an analysis based on simple accounting principles to

high book-to-market stocks could lead to anomalous returns (Piotroski, J.D., 2000). Investing in
value stocks with solid financial performance is the foundation of the approach. Piotroski
develops an F-score in order to identify companies that have demonstrated good financial
performance. The core argument behind Piotroski F-score is that higher scoring companies tend
to be more profitable, financially stable, and better positioned for growth in the future.
The three metrics used by the nine signals to assess a stock's financial condition are profitability,
financial leverage/liquidity, and operating efficiency.