CAPITAL STRUCTURE AND CREDIT RISK

CAPITAL STRUCTURE AND CREDIT RISK - AccountsPayable

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Accounts Payable liabilities Other current liabilities Corporate Bonds Other long-term market debt Other liabilities
Background image of page 2
Credit risk :  probability that a corporation will  either default on debt or declare bankruptcy. Default risk :  probability that a  corporation will  principal when they come  due (we refer to  this an inability to “service”  the debt) Bankruptcy risk :  probability that a  corporation will file for bankruptcy
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What is the chance (probability) that the  corporation will fail to make interest or principal  payments when due? Because of high collection costs, creditors  evaluate credit risk carefully Failure events: restructurings, especially  troubled debt restructuring; default; bond rating  down-grading; going-concern qualifications;  bankruptcy 
Background image of page 4
Probability that a firm will file for Chapter 11 
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/09/2012 for the course ACCT 4115 taught by Professor Jin during the Summer '11 term at UCM.

Page1 / 15

CAPITAL STRUCTURE AND CREDIT RISK - AccountsPayable

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online