Determining Credit Ratings The chart below shows financial ratios for three companies. Use the data, along with Exhibit 7.6 to determine a bond rating for each of the three companies below.

EBITA/

Average Assets Operating Margin EBITA Margin EBITA/

Interest Expense

(FFO +

Int Exp)/

Int Exp Debt/

EBITDA DEBT/

Book Capitalization FFO/

Debt Retained Cash Flow/Net Debt CAPEX/

Depreciation Revenue Volatility Company 1. . 12.80% 16.30% 18.82% 15.0 13.4 1.6 38.12% 44.72% 37.64% 1.3 10.1 Company 2. . 9.20% 11.40% 13.00% 2.8 5.1 3.3 48.60% 21.73% 21.92% 1.2 16.0 Company 3. . 13.87% 18.62% 20.76% 22.2 20.5 1.3 39.87% 60.82% 32.79% 1.3 6.3