Question
If two issuers are identical except one has much stronger asset backing, which of the four Cs is better and why does it matter?
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Answer
Collateral; stronger assets improve expected recovery in default.
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Question
Why does high customer concentration weaken a firm's business model from a credit perspective?
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Answer
Revenue is less predictable and more vulnerable to disruption.
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Question
What does a falling EBIT/Interest ratio indicate about an issuer's ability to service debt?
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Answer
Interest coverage is weakening.
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Question
Why is a cyclical industry usually viewed as riskier than a utility in credit analysis?
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Answer
Cash flows are more vulnerable during economic downturns.
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