a. What is the difference between a positive and negative covenant? b. What is the purpose of the analysis of covenants in assessing the credit risk of an issuer?
a. What is a maintenance test? b. What is a debt incurrence test and when does it come into play?
Some credit analysts place less emphasis on collateral compared to covenants and business risk. Explain why.
Why do credit analysts begin with an analysis of the industry in assessing the business risk of a corporate issuer?
What is the purpose of a credit analyst investigating the market structure of an industry (e.g., unregulated monopoly, oligopoly, etc.)?
What should be the focus of an analyst with respect to the regulation of an industry?
In analyzing the labor situation in an industry in which a corporate issue operates, what should the credit analyst examine?
The underlying economic theory regarding many corporate governance issues is the principal agency relationship between the senior managers and the shareholders of corporations. Explain this relationship.
With respect to corporate governance, what are the mechanisms that can mitigate the likelihood that management will act in its own self-interest?
a. What are corporate governance ratings? b. Are corporate governance ratings reported to the investing public? c. What factors are considered by services that assign corporate governance ratings?