财务分析与证券定价(英文)chapter21

Chapter21TheAnalysisofCreditRiskLinksLinktoPreviousChaptersThisChapterLinktoWebPageChapter20showedhowtheanalysisoffundamentalshelpsintheevaluationofequityrisk.Value-at-riskprofilesweredevelopedtoassessequityrisk.Thischaptershowshowfundamentalanalysishelpsintheevaluationoftheriskofafirmdefaultingonitsdebt.Value-at-riskprofilesaredevelopedtoassessdefaultrisk.Thebook’swebsitehasmorediscussionofrisk.Dothefinancialstatementsgiveindicationsofwhetherafirmmightdefaultonitsdebt?Whatratiosarerelevant?Howarecreditratingscoresdeveloped?Howarevalue-atriskprofilesdevelopedforbusinessdebt?Howdoesproformaanalysisaidintheevaluationofcreditrisk,liquidityplanningandfinancialstrategy?Dothefinancialstatementsgiveindicationsofwhetherafirmmightdefaultonitsdebt?Whatratiosarerelevant?Howarecreditratingscoresdeveloped?Howarevalue-atriskprofilesdevelopedforbusinessdebt?Howdoesproformaanalysisaidintheevaluationofcreditrisk,liquidityplanningandfinancialstrategy?Whatyouwilllearnfromthischapter•Howdefaultriskdeterminesthepriceofcredit(thecostofdebtcapital)•Whatdeterminesdefaultrisk•Howdefaultriskisanalyzed•Howcreditscoringmodelswork•Howproformaanalysisaidsinassessingthedefaultrisk•Howvalue-at-riskanalysisisusedtoassesdefaultrisk•HowfinancialplanningworksDefaultRiskandDefaultPremiumsRequiredReturnonDebt=Risk-freeRate+DefaultPremiumThedefaultpremiumisdeterminedbytheriskthatthedebtorcoulddefaultSimilarterms:•Requiredreturnondebt•Costofdebt•PriceofcreditTheSuppliersofCredit•Publicdebtmarketinvestorswhoinclude(long-term)bondholdersand(short-term)commercialpaperholders.•Commercialbanksmakeloanstofirms.•Otherfinancialinstitutionssuchasinsurancecompanies,financehousesandleasingfirmsmakeloans,muchlikebanks,butusuallywithspecificassetsservingascollateral.•Supplierstothefirmwhogrant(usuallyshort-term)creditupondeliveryofgoodsandservices.Off-Balance-SheetFinancingOff-balance-sheetfinancingtransactionsarearrangementstofinanceassetsandcreateobligationsthatdonotappearonthebalancesheet.Examples:OperatingleasesAgreementsandcommitments:•third-partyagreements•through-putagreements•take-or-payagreements•repurchaseagreements•salesofreceivableswithrecourseUnfundedpensionliabilitiesnotbookedGuaranteesofthird-partyorrelated-partydebtReformulatedIncomeStatementsandCashFlowStatementsIncomeStatement:Distinguishincomefromoperationsthat“covers”netfinancialexpenseThereformulationfollowsthatforprofitabilityanalysisinChapter9CashFlowStatement:Distinguish(unlevered)cashflowfromoperationsthatcanbeusedtomakepaymentsondebtThereformulationfollowsthatinChapter10RatioAnalysisforDefaultEvaluationSteps:1.Reformulatefinancialstatements2.CalculateratiosReformulatingtheBalanceSheetThekeyideainthereformulationofthebalancesheetistoorderassetsbyliquidityandliabilitiesbymaturity.Alsorecognizeoffbalancesheetliabilities.(Annotateasyoureformulate)Issues:•Detailondifferentclassesofdebtandtheirvaryingmaturitiesisavailableinthedebtfootnotes;thisdetailcanbebroughtuptothefaceofreformulatedstatements.•Debtofunconsolidatedsubsidiaries(wheretheparentownslessthat50%,buthaseffectivecontrol)shouldberecognized.•Long-termmarketablesecuritiesaresometimesavailableforsaleintheshort-termifaneedforcasharises.•Long-termdebt(ofsimilarmaturity)canbepresentedonanetbasis.•Removedeferredtaxliabilitiesthatareunlikelytoreversefromliabilitiestoshareholders’equity.•AddtheLIFOreservetoinventoryandtoshareholder’sequitytoconvertLIFOtoaFIFObasis.•Off-balance-sheetdebtcanberecognizedonthefaceofthestatement.•Contingentliabilitiesthatcanbeestimatedshouldbeincludedinthereformulatedstatements.•Theriskinderivativesandotherfinancialinstrumentsshouldbenoted.RatioAnalysis:Short-TermLiquidityRatios•LiquidityStockMeasures•LiquidityFlowMeasuressLiabilitieCurrentsInvestmentterm-ShortCashRatioCashsLiabilitieCurrentsReceivablesInvestmentterm-ShortCashRatioTestAcidorQuicksLiabilitieCurrentAssetsCurrentRatioCurrentesExpenditurCapitalOperationsfromFlowCashUnleveredesExpenditurCapitaltoFlowCash365esExpenditurCapitalsReceivablesInvestmentterm-ShortCashIntervalDefensivesLiabilitieCurrentOperationsfromFlowCashRatioFlowCashRatioAnalysis:Long-termSolvencyRatios•SolvencyStockMeasures•SolvencyFlowMeasuresEqutiyDebtterm-LongDebtterm-LongRatioDebttermLongEquityTotalDebtTotalEquitytoDebtEquityTotalsLiabilitieAssetsTotalterm-LongCurrentDebtTotalAssetsTotalDebttoDebtTotalOperationsfromFlowCashUnleveredDebttoCFOBasisCashChargesFixedChargesFixedOperationsfromFlowCashUnleveredCoverageChargeFixedChargesFixedChargesFixedIncomeOperatingCoverageChargeFixedBasisCashInterestCashNetOperationsfromFlowCashUnleveredCoverageInterestEarnedInterestTimesExpenseInterestNetIncomeOperatingCoverageInterestRatioAnalysis:OperatingRatiosPoorprofitabilityincreasesthelikelihoodofdefault.SotheprofitabilityanalysisofChapter11isanimputintocreditanalysis.Watchparticularly:•RNOA•Operatingprofitmargins•SalesgrowthForecastingandCreditRiskThePrelude:•Knowthebusiness•Appreciatethe“moralhazard”problemofdebt•Understandingthefinancingstrategy•Unde