1. Explain why selecting a target senior debt rating is a reasonable approach to choosing a capital structure. Explain why a target senior debt rating of single- A is a prudent objective when there is only a very limited new issue market for non-investment-grade debt, and when investor willingness to purchase triple-B-rated debt is likely to be highly sensitive to the state of the economy.
3. A company's capital structure consists solely of debt and common stock equity. What actions should be taken if the company believes it is:
4. What are the three steps in a comparative credit analysis? How can a firm select an appropriate rating objective?
5. What is subordinated debt? What is a debenture? What is convertible debt? What are loan covenants? Why do firms usually issue convertible bonds in that form rather than as senior debt?
Debt ratings, types of leases, components of capital and credit analysis are discussed. The expert compares and contrasts operating leases and a capital lease. The main advantages are given.