In the Learning Activity “Critical Areas of Financial Analysis” you learned how the opinions of...

Question

In the Learning Activity “Critical Areas of Financial Analysis” you learned how the opinions of other analysts are a way for managers to make decisions. Examine Table 1.3 (Bond Ratings) carefully and understand the different classifications of bonds by the different analysts. Then, conduct research and find an organization that offers a bond with a “Very High Quality” rating and one that offers bond with a “Very Poor” rating as stated in the table. Provide the link to the financials and examine them. List at least three financial factors for each organization that you feel are the reasons for the analyst ratings. Do you agree with the analyst ratings? Why or not? Would you personally invest in the organization by buying the bonds? Why or why not?

Sandeep · Accepted Answer

ANALYST RATINGS
	Rating Agency
	Microsoft Bond Rating
	Bombardier Inc.
	Standard & Poor's Rating
	AAA
	CCC+
	Moody’s
	Aaa
	Caa1
	Fitch Rating
	AAA
	CCC+
Microsoft has been darling of the investor and featured in top 10 Fortune companies several years. 
 Company’s strong financial position and leverage to hover around .5x makes it candidate for Very good rating.
Microsoft’s outstanding debt of over $ 51 bn is easily manageable and able backed by ready supply of Cash and equivalents of over $ 131 Bn. 
Microsoft’s leverage/Debt-equity ratio on June 2018 was .9217, June 2019 - .7053, June 2020- .535 and June 2021 - .41.Hence it’s been consistently going down thus maintaining debt to comfortable level but also reducing cash flows on interest payments .
Microsoft Free cash flow stood at $ 57bn in Dec 2021, registering jump of 24% YoY.
Microsoft has adequate capacity to continue retiring bonds at maturity, dividend outflow, repurchase shares and scout for strategic acquistions.
Microsoft’s revenue has been growing at CAGR of 17.43% (approx.) over last 4 years and its EBITDA growing at CAGR of 23.12%.Company’s EBITDA margin have stood at over 47% over last few due to optimum product mix shift. Demand for Microsoft’s cloud based products will soon outpace PC segment.
Microsoft EV/Fwd. EBITDA is 22.4x which highest amongst its peers in industry with average of 12.7x. Debt to EBITDA ratio is .60 indicating what proportion of EBITDA is used for debt payments.

In the Learning Activity “Critical Areas of Financial Analysis” you learned how the opinions of other analysts are a way for managers to make decisions. Examine Table 1.3 (Bond Ratings) carefully and...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment