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CAPITAL STRUCTURE AND CREDIT RISK

CAPITAL STRUCTURE AND CREDIT RISK - AccountsPayable...

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Accounts Payable liabilities Other current liabilities Corporate Bonds Other long-term market debt Other liabilities
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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
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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 
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Probability that a firm will file for Chapter 11 
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CAPITAL STRUCTURE AND CREDIT RISK - AccountsPayable...

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