5 terms

CFA2 Fixed income

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four C's of credit analysis
character, covenants, collateral, capacity
profitability ratios
assess the issuer's ability to generate earnings sufficient to pay interest and repay principal. ROE = NI/equity=NI/sales X sales/TA X TA/equity
short term solvency ratios
determine the availability of liquid assets to meet short-term obligations
coverage ratios
examine the adequacy of cash flows generated through earnings to meet debt and lease obligations
capitalisation/financial leverage ratio
with ref to industry, determine the firm's ability to take on aditional risk associated with increased borrowing. total debt to cap ratio = (current liabilities+long term debt)/(current liabilities+long-term debt+minority interest+shareholders equity)