In contrast public debt investors have little access

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In contrast, public-debt investors have little access to additional information; they can __decide to buy or sell the bond at the current price. They have access to public information eluding earnings announcements and annual reports (see Research Insight below). Public-debt estors also can avail themselves of debt ratings (which we discuss later), but apart from that, lie-debt investors have publicly available information only. imilar to lenders and investors, credit raters assess credit risk, but their purpose and meth- -- differ in several important respects. First, credit rating agencies have no direct financial olvement with the companies whose credit they are rating; they perform the analysis to 'ide a publicly available signal to lenders and potential lenders. Second, credit rating agen- have access to more, and often better, information than other lenders. Credit analysts are ubject to Regulation FD and routinely meet with managers both in conference calls and to face. Thus credit-rating agencies can refine the risk analysis for individual companies compare statistics and trends across companies. Credit raters have the best, most current - rmation. It is for this reason that other creditors rely heavily on credit ratings. [On August -__000, the SEC adopted Regulation Fair Disclosure (FD) to curb selective disclosure of Ormation by publicly traded companies. Reg FD requires that if a U.S. public company dis- material nonpublic information to a select group (such as equity analysts), the company simultaneously disclose the information to the public. The regulation levels the informa- playing field.] I RESEARCH INSIGHT Accounting Earnings and Bond Prices esearchers Peter Easton, Steven Monahan, and Florin Vasvari study how companies' earnings announcements affect bond prices. They document large changes in bond prices around earnings - nouncements and find that these changes are larger for net losses. Thus, companies with public ebt have strong incentives to avoid losses because they depress bond prices. These researchers also find that bond-price changes are larger for speculative grade bonds. A main inference is that accounting earnings (and its components) are priced in bond returns. (Source: Initial Evidence on the Role -Accounting Earnings in the Bond Market, ) ALYZING CREDIT RISK main purpose of a credit analysis is to quantify the risk of loss from nonpayment. To quan- 0.- expected credit losses, potential lenders must assess the chance of default and the size of L03 Perform a credit analysis,and compute and interpret measuresof credit risk.
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(A)Industry competition Increased rivalry raises the cost of doing business as companies must compete for workers, advertise products, and research and develop new products. Home Depot's industry competition is intense. Its biggest rival is Lowe's Companies. In many markets, Lowes and Home Depot compete directly for the same do-it-yourself customer. Smaller hardware stores and lumber yards create additional rivalry (such as Ace Hardware and Sears). Competition also
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