Monitoring the credit quality of portfolio companies has become critical in the capital-starved environment of 2023, and, in fact, credit analysis has become the new equity analysis. Credit quality is multidimensional by nature: The Viridian Credit Tracker Model uses 11 market and financial variables to quantify four main credit factors: Liquidity, Leverage, Profitability, and Size, each of which we believe contributes to a full understanding of a company's overall credit quality.

It is sometimes advantageous, however, to have a single indicator of credit quality to use as a portfolio monitoring tool. We believe the best single number that an investor...