easy · Private Credit & Debt underwriting-credit-analysis
How does the 'Debt Yield' metric differ from coverage ratios in its approach to credit risk?
- Coverage ratios are only used for distressed companies, while Debt Yield is for healthy ones.
- Debt Yield uses Net Income instead of EBITDA to be more conservative.
- Debt Yield is independent of interest rates, focusing only on the relationship between earnings and total debt quantum.
- Debt Yield includes the market value of equity in the denominator.
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