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Debt Rating.

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Running head: DEBT RATING 1 Debt Rating Student’s Name Institutional Affiliation DEBT RATING 2 Introduction The debt rating of a business helps to determine the creditworthiness of the business and thus the bank or financial institution would be in a position to determine whether to grant the business a loan or not. For this analysis, five companies were chosen which include company A, B, C, D and E. The statement of financial position, the statement of financial performance and the statement of cash flows for these companies were provided as well as their S & P debt rating, EBIT to net capital ratio, pre-tax interest coverage, cash flow from operations to total debt and net debt to net capital ratio. This represented the overall rating for companies in the industry which would assist in determining the debt ratings for the five companies. This paper provides an analysis of the ranking of the five firms in terms of their creditworthiness, it determines the debt rating for the five companies for year 3 and an explanation of the rationale and the methods that were used in order to assign these debt ratings. Ranking of the Five Firms in the Order of Their Credit Worthiness To determine the creditworthiness of the five firms, it would be important to compare their debt level with their equity level. Ideally, if the debt level is higher than the equity level, the debtto-equity ratio would be higher which would mean that the corporation would not be a credit worth firm. On ...
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