Underwritten, Syndicated Offerings and ...
Key credit analysis measures fall into 4 different groups:
It is from operating cash flows that companies can service their debt payments. The operating income can be obtained by subtracting operating expenses from operating revenues, and it is commonly referred to as “earnings before interest and taxes” (EBIT). Below are other cash flow measures that are equally important and analysts should look at:
Coverage ratios measure the issuer’s ability to meet or “cover” its interest payments.
While assessing an issuer’s liquidity, credit analysts tend to also look at the following:
Which of the following is a conservative coverage measure in credit analysis?
- EBIT/Interest expense
- Free cash flow before interest
The correct answer is B.
Coverage ratios measure the issuer’s ability to meet or “cover” its interest payments. EBIT/Interest expense is a conservative measure of interest coverage since at times it does not account for the repayment of capital and excludes depreciation and amortization.
The change in the price of a bond can be summarized as follow:... Read More
Debt markets play a critical role in the global economy. Companies and governments... Read More