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Credit risk is the risk of default on a debt that may arise from a borrower...

Credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.  If you were to measure a company’s credit risk, which ratios that you would analyze?

                                                                                                                                           

  1. TDR
  2. P/E
  3. TIER
  4. CASH COVERAGE
  5. MKT/BOOK
  6. A, C, and D.   
  7. A and C
  8. B and E
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Homework Answers

Answer #1

(A) I would be analysing target debt service ratio which will be providing me with the idea about debt repayment capability of the organisation.

(C) Times interest earned ratio will be reflecting about the company's ability of generation of the cash flow in order to pay the interest.

(D) Cash coverage ratio is also giving a reflection about the ability of the company to repay the borrowers.

Prince to earning ratio and market to book ratio does not reflect anything related to credit risk.

Correct answer will be option (F) A,C,D

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