EXHIBIT 7.5 Standard & Poor's Key Financial Ratios and Ratings of Corporate Debt Three-Year Medians AAA AA A BBB BB B CCC EBIT interest coverage 23.8 13.6 6.9 4.2 2.3 0.9 0.4 EBITDA interest coverage 25.3 17.1 9.4 5.9 3.1 1.6 0.9 FFO/Total debt (%) 167.8 77.5 43.2 34.6 20.0 10.1 2.9 Free operating cash flow/Total debt (%) 104.1 41.1 25.4 16.9 7.9 2.6 (0.9) Total debt/EBITDA 0.2 1.1 1.7 2.4 3.8 5.6 7.4 Return on capital (%) 35.1 26.9 16.8 13.4 10.3 6.7 2.3 Total debt/Capital (%) 6.2 34.8 39.8 45.6 57.2 74.2 101.2
EXHIBIT 7.5 Standard & Poor's Key Financial Ratios and Ratings of Corporate Debt Three-Year Medians AAA AA A BBB BB B CCC EBIT interest coverage 23.8 13.6 6.9 4.2 2.3 0.9 0.4 EBITDA interest coverage 25.3 17.1 9.4 5.9 3.1 1.6 0.9 FFO/Total debt (%) 167.8 77.5 43.2 34.6 20.0 10.1 2.9 Free operating cash flow/Total debt (%) 104.1 41.1 25.4 16.9 7.9 2.6 (0.9) Total debt/EBITDA 0.2 1.1 1.7 2.4 3.8 5.6 7.4 Return on capital (%) 35.1 26.9 16.8 13.4 10.3 6.7 2.3 Total debt/Capital (%) 6.2 34.8 39.8 45.6 57.2 74.2 101.2
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter5: Risk Analysis
Section: Chapter Questions
Problem 13PC: Calculating and Interpreting Risk Ratios. Refer to the financial statement data for Hasbro in...
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Question
100%
Exhibit 7.5 describes the key financial ratios Standard & Poor’s analysts use to assess credit risk and assign credit ratings to industrial companies. The same financial ratios for three firms follow.
| Firm 1 | Firm 2 | Firm 3 | |
| EBIT interest coverage | 2.7 | 12.8 | 16.7 |
| EBITDA interest coverage | 3.7 | 18.7 | 24.6 |
| FFO/Total debt (%) | 19.8 | 80.2 | 135.1 |
| 8.2 | 40.6 | 87.9 | |
| Total debt/EBITDA | 4.0 | 1.0 | 0.3 |
| Return on capital (%) | 9.9 | 29.2 | 32.7 |
| Total debt/Capital (%) | 54.8 | 30.2 | 8.1 |
Required:
- What credit rating would be assigned to Firm 1?
- What credit rating would be assigned to Firm 2?
- Does Firm 3 have more or less credit risk than Firm 2?
EXHIBIT7.5
Transcribed Image Text:EXHIBIT 7.5 Standard & Poor's Key Financial Ratios and Ratings of Corporate
Debt
Three-Year Medians
AAA
AA
A
BBB
BB
B
CCC
EBIT interest coverage
23.8
13.6
6.9
4.2
2.3
0.9
0.4
EBITDA interest coverage
25.3
17.1
9.4
5.9
3.1
1.6
0.9
FFO/Total debt (%)
167.8
77.5 43.2
34.6
20.0
10.1
2.9
Free operating cash flow/Total debt (%)
104.1
41.1
25.4
16.9
7.9
2.6
(0.9)
Total debt/EBITDA
0.2
1.1
1.7
2.4
3.8
5.6
7.4
Return on capital (%)
35.1
26.9
16.8
13.4
10.3
6.7
2.3
Total debt/Capital (%)
6.2
34.8
39.8
45.6
57.2
74.2
101.2
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