Question
a) Discuss the advantages and disadvantages of issuing floating rate debt (from the borrowers standpoint). b) Should an analyst compare financial ratios between 2 firms
a) Discuss the advantages and disadvantages of issuing floating rate debt (from the borrowers standpoint).
b) Should an analyst compare financial ratios between 2 firms which operate in separate industries? Why or why not?
c) What interest rate should you use for a company rated BB?
d) You are analyzing 2 companies, both of which experienced 8% revenue growth comprised entirely of volume growth. Company A experienced a significant improvement in margins. Company B experienced less margin improvement that Company A. What conclusions can you draw about the cost structures of the 2 companies?
e) You are analyzing 2 companies, and both companies have identical cost structureseach has 40% fixed costs and 60% variable costs. Company A experienced 10% revenue growth which resulted in a significant improvement in margins. Company B also experienced a 10% revenue growth, but much less improvement in margins. What conclusions can you draw regarding what was driving the revenue growth of each company?
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