1. All creditors at the same level of the capital structure being treated the sa
ID: 2802402 • Letter: 1
Question
1. All creditors at the same level of the capital structure being treated the same is known as?
2. A credit analyst is looking at three different companies – an auto company, a drug company and a mining company. The auto and mining companies are cyclical. The drug company is non-cyclical. The least credit risk is likely in the
a. Auto company
b. Drug company
c. Mining company
3. Same companies in #17. The auto company has a debt/ebitda ratio of 6.0, the mining company has a debt/ebitda of 2.0 and the drug company has a debt/ebitda ratio of 1.0. Which company likely carries the most credit risk?
a. Auto company
b. Drug company
c. Mining company
4. At the bottom of an economic cycle the loss severity on a credit default is likely to be
a. Lower
b. Higher
c. Unchanged
5. At default at a company that is in a mature/declining industry is likely to experience severity that is
a. Lower
b. Higher
c. Unchanged
Explanation / Answer
1)
Pari-passu refers to equal footing. This is a Latin word used to refer a group of equal people with giving preferential order to them. All bond holders, suppliers, preference stockholders etc. each class is each Pari-passu.
Hence, All creditors at the same level of the capital structure being treated the same is known as Pari-passu.
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