medium · Corporate Credit Analysis fsa
An analyst observes a firm with a 'Sloan Ratio' exceeding 10%.
What does this indicate regarding the firm's working capital and credit risk?
- The firm is highly efficient at converting inventory into cash flow, reflecting strong receivables discipline.
- Working capital swings are becoming a persistent, recurring drag on the business's liquidity.
- The firm holds substantial tangible collateral value backing its outstanding debt obligations.
- Accruals are high relative to assets, suggesting lower-quality earnings and higher downgrade risk.
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More Corporate Credit Analysis fsa practice
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