TABLE 10-3 Debt Ratings: Median Financial. Ratios by Category
|
|
Median ratios for overall category in January 2011
(excludes financial firms)
Earnings before
|
|
S&P
|
interest and |
|
Cash flow from
|
|
|
debt
|
taxes to net |
Pretax interest
|
operations to
|
Net debt to net
|
|
rating
|
capital |
coverage
|
total debt
|
capital
|
|
AAA
|
41.6%
|
105.4
|
317% |
- 33% |
|
AA
|
25.9%
|
14.6
|
47% |
31% |
|
A
|
23.5%
|
11.5
|
57% |
22% |
|
BBB
|
16.1%
|
5.9
|
35% |
32% |
|
BB
|
15.4%
|
3.7
|
25% |
37% |
|
B
|
9.6%
|
1.5
|
14% |
58% |
|
CCC
|
-2.6%
|
-0.3
|
>0.1% |
87% |
Using Table 10-3 from your textbook (above):
(1) Compute the four ratios above for your company and determine which rating is closest for each ratio (the numbers in the table are medians, not floors and ceilings).
(2) "Guess" what the company's overall rating would be based on the four ratios.
(3) Look up the actual debt rating and see how close you were with your "guess."