easy · Corporate Credit Analysis cca-core
A credit analyst compares a regulated water utility and a semiconductor manufacturer. Both have 3.0x Net Debt/EBITDA.
Which statement best reflects the credit risk synthesis?
- Both companies carry identical credit risk since their leverage ratios happen to be the same.
- The utility is a stronger credit because its industry risk is lower and cash flows are more predictable.
- The utility is actually riskier because it is a regulated monopoly with no meaningful growth upside.
- The semiconductor firm is the stronger credit because technology is a higher-growth, higher-margin industry.
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