hard · Corporate Credit Analysis
An analyst is evaluating two peers. Company A has Debt/EBITDA of 4.0x and FFO/Debt of 12%. Company B has Debt/EBITDA of 4.0x and FFO/Debt of 22%.
Which of the following is the most likely credit implication?
- Company B is a stronger credit because its cash flow conversion allows for faster deleveraging.
- The credits are identical because their total leverage multiples are the same.
- The ratings must be identical as they sit in the same Debt/EBITDA bucket.
- Company A is stronger because it likely has lower interest expense per dollar of debt.
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