Notities
Examen:
o Always mention your assumptions
o Uses names of the standardized B/S and income statement
o Income statement
Increase in expense
Decrease in profit/loss
Decrease in tax expense
o forecast number of one or 2 years
o You get forecasted B/S and income statement and apply one of the valuation models
o Write always everything in words, like formulas you already get some points
Credit risk= risk that they are not able to pay the interest and capital
The higher the rating, the better the creditworthiness
No company received a triple A rating
Triple B is most frequently given rating
Only 18% of the companies that received a rating above triple B
triple B: just investment grade debt
o below triple B: non-investment grade debt
Dia 5
o use EBITDA to calculate the operating cash flow to debt
Dia 6: table 10.8
o 6 financial ratio’s
o
o Model can be applied to private companies ( because you don’t find a characteristic
like market to book value)
o If coefficient is positive:
The higher the firm size, the higher the creditworthiness
The higher the profitability, the higher the creditworthiness
The higher the standard deviation in return on invested capital negative
sign less creditworthiness
Higher debt to capital ratio lower creditworthiness
Project
o Compute firm size total invested capital ( see condensed B/S) present in
billions!!!!
o Use EBITA for operating cash flow
o You compute ratios and multiply with the coefficients
o You add everything plus the constant!! you get a score ( see onderaan table)
o Is score >4,93: double A or higher
Examen:
o Always mention your assumptions
o Uses names of the standardized B/S and income statement
o Income statement
Increase in expense
Decrease in profit/loss
Decrease in tax expense
o forecast number of one or 2 years
o You get forecasted B/S and income statement and apply one of the valuation models
o Write always everything in words, like formulas you already get some points
Credit risk= risk that they are not able to pay the interest and capital
The higher the rating, the better the creditworthiness
No company received a triple A rating
Triple B is most frequently given rating
Only 18% of the companies that received a rating above triple B
triple B: just investment grade debt
o below triple B: non-investment grade debt
Dia 5
o use EBITDA to calculate the operating cash flow to debt
Dia 6: table 10.8
o 6 financial ratio’s
o
o Model can be applied to private companies ( because you don’t find a characteristic
like market to book value)
o If coefficient is positive:
The higher the firm size, the higher the creditworthiness
The higher the profitability, the higher the creditworthiness
The higher the standard deviation in return on invested capital negative
sign less creditworthiness
Higher debt to capital ratio lower creditworthiness
Project
o Compute firm size total invested capital ( see condensed B/S) present in
billions!!!!
o Use EBITA for operating cash flow
o You compute ratios and multiply with the coefficients
o You add everything plus the constant!! you get a score ( see onderaan table)
o Is score >4,93: double A or higher
