The Bertelsmann Transformation Index (BTI) analyses and evaluates the quality of democracy, a market economy and political management in 129 developing and transition countries. It measures successes and setbacks on the path toward a democracy based on the rule of law and a socially responsible market economy. The BTI Status Index ranks countries according to their quality of democracy and market economy as of January 31, 2015.  

The state of political transformation is measured in terms of five criteria (Stateness, Political participation; Rule of Law; Stability of democratic institutions; Political and social integration), which in turn are derived from assessments made in response to 18 questions. Political participation is measured by the normative statement: "The populace decides who rules and it has other political freedoms."

Thresholds determine five categories:

Excellent (8.50 – 10.00); Sound (6.50 – 8.49); Fair (4.50 – 6.49); Flawed (2.50 – 4.49); Poor (1.00 – 2.49)

More detail on the concepts used can be found here.