Its probably safe to say that theres nothing more important in determining a bonds rating than the underlying financial condition and operating results of the company issuing the bond. Just as financial ratios can be used in the analysis of common stocks, they can also be used in the analysis of bondsa process we refer to as credit analysis. In credit analysis, attention is directed toward the basic liquidity and profitability of the firm, the extent to which the firm employs debt, and the ability of the firm to service its debt.

A. Three of these companies have bonds that carry investment-grade ratings. The other 3 companies carry junk-bond ratings. Judging by the information in the table, which 3 companies have the investment-grade bonds and which 3 have the junk bonds? Briefly explain your selections.

B. One of these 6 companies is an AAA-rated firm and one is B-rated. Identify those companies. Briefly explain your selections.

C. Of the remaining 4 companies, 1 carries an AA rating, 1 carries an A rating, and 2 have BB ratings. Which companies are they?

	Company	Company	Company	Company	Company	Company
Fianancial Ratio	1	2	3	4	5	6
1. Current Ratio	1.13x	1.39x	1.78x	1.32x	1.03x	1.41x
2. Quick Ratio	0.48x	0.84x	0.93x	0.33x	0.50x	0.75x
3. Net Profit Margin	4.60%	12.90%	14.50%	2.80%	5.90%	10.00%
4. Return on Total Capital	15.00%	25.90%	29.40%	11.50%	16.80%	28.40%
5. Long Term Debt to Total Capital	63.30%	52.70%	23.90%	97.00%	88.60%	42.10%
6. Owners' Equity Ratio	18.60%	18.90%	44.10%	1.50%	5.10%	21.20%
7. Pretax Interest Coverage	2.3x	4.5x	8.9x	1.7x	2.4x	6.4x
8. Cash Flow to Total Debt	34.70%	48.80%	71.20%	20.40%	30.20%	42.70%