Question
Why is a cyclical industry usually viewed as riskier than a utility in credit analysis?
Tap to flip
Answer
Cash flows are more vulnerable during economic downturns.
Tap to flip back
Question
If a firm has strong market share, entry barriers, and pricing power, what does that suggest about credit quality?
Tap to flip
Answer
A stronger competitive position and generally better credit quality.
Tap to flip back
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?
Tap to flip
Answer
Collateral; stronger assets improve expected recovery in default.
Tap to flip back
Question
How do covenants improve a bondholder's credit position?
Tap to flip
Answer
They restrict issuer actions that could weaken creditors.
Tap to flip back