Abstract. In this paper we review the spectroscopic diagnostic techniques that can be applied to XUV observations of active stars. In particular, we discuss methods for the determination of electron densities, emission measures and the chemical composition of the stellar transition regions and coronae. We pay particular attention to the atomic data used and we revise several previous analyses with the most recent atomic data (from CHIANTI). We find severe limitations to some of the commonly used methods and atomic data and we obtain results which are significantly different from other authors. We illustrate this with a number of examples. We analyse a combined set of multi-wavelength observations (EUVE, HST/STIS, FUSE) for the quiescent phase of the dMe star AU Mic. A major conclusion of this paper is that the use of spectral lines from the Li and Na isoelectronic sequences, common in previous literature, produces erroneous results in the determination of emission measures, elemental abundances and transition region densities.