![Example 12 EDGAR 10-K form
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) shares in Millions, $ in MillionsDec. 31, 2016 Dec. 31, 2015
ASSETS
Allowance for trade and other receivables 392 372
Common Stock [Member]
EQUITY
Common stock, par value (in dollars per share) 0.01
Common Stock, shares issued (in shares) 3976
Common Stock, Shares Authorized (in shares) 6000
Class B Stock [Member]
EQUITY
Common stock, par value (in dollars per share) 0.01
Common Stock, shares issued (in shares) 71
Common Stock, Shares Authorized (in shares) 530
Copyright 2018 CapitaLogic Limited](https://image.slidesharecdn.com/08-180825045523/85/08-3-corporate-credit-analysis-13-320.jpg)
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08.3 corporate credit analysis
- 1. Example Index Copyright 2018CapitaLogic Limited Example Description Excel technique 1 Historical volatility of Ford Motor 2 Black-Scholes formula 3 Merton's corporate default model Goal Seek 4 Balance sheet of Ford Motor Web query 5 Income statement of Ford Motor Web query 6 Financial ratios of Ford Motor 7 Listed manufacturing companies 8 Altman's Z-score 9 Altman's Z'-score 10 Altman's Z"-score 11 Consolidated assessment 12 EDGAR 10-K form This Excel workbook is prepared in accordance with Chapter 8 of the text book "Managing Credit Risk Under The Basel III Framework, 3rd ed" Authored by : Dr. LAM Yat-fai (林日辉) Principal, Structured Products Analytics, CapitaLogic Limited Adjunct Professor of Finance, City University of Hong Kong Doctor of Business Administration CFA, CAIA, CAMS, FRM, PRM Website: https://sites.google.com/site/crmbase E-mail: crmbasel@gmail.com Copyright 2018 CapitaLogic Limited
- 2. Example 1 Historicalvolatility Date Price Return Date Price Return Date 30 Dec 2016 12.13 -0.82% 31 Dec 2015 14.09 -0.57% 31 Dec 2014 29 Dec 2016 12.23 -0.16% 30 Dec 2015 14.17 -0.42% 30 Dec 2014 28 Dec 2016 12.25 -1.14% 29 Dec 2015 14.23 0.35% 29 Dec 2014 27 Dec 2016 12.39 -0.56% 28 Dec 2015 14.18 -0.91% 26 Dec 2014 23 Dec 2016 12.46 0.48% 24 Dec 2015 14.31 -0.35% 24 Dec 2014 22 Dec 2016 12.40 -1.92% 23 Dec 2015 14.36 1.12% 23 Dec 2014 21 Dec 2016 12.64 -1.10% 22 Dec 2015 14.20 3.37% 22 Dec 2014 20 Dec 2016 12.78 0.94% 21 Dec 2015 13.73 -0.51% 19 Dec 2014 19 Dec 2016 12.66 0.24% 18 Dec 2015 13.80 -1.30% 18 Dec 2014 16 Dec 2016 12.63 0.40% 17 Dec 2015 13.98 -2.68% 17 Dec 2014 15 Dec 2016 12.58 0.40% 16 Dec 2015 14.36 3.47% 16 Dec 2014 14 Dec 2016 12.53 -1.90% 15 Dec 2015 13.87 1.82% 15 Dec 2014 13 Dec 2016 12.77 -0.39% 14 Dec 2015 13.62 -0.15% 12 Dec 2014 12 Dec 2016 12.82 -2.69% 11 Dec 2015 13.64 -2.32% 11 Dec 2014 09 Dec 2016 13.17 1.07% 10 Dec 2015 13.96 0.50% 10 Dec 2014 08 Dec 2016 13.03 -0.23% 09 Dec 2015 13.89 -0.57% 09 Dec 2014 07 Dec 2016 13.06 3.90% 08 Dec 2015 13.97 -1.07% 08 Dec 2014 06 Dec 2016 12.56 0.96% 07 Dec 2015 14.12 -0.56% 05 Dec 2014 05 Dec 2016 12.44 1.62% 04 Dec 2015 14.20 1.56% 04 Dec 2014 02 Dec 2016 12.24 -1.54% 03 Dec 2015 13.98 -1.98% 03 Dec 2014 01 Dec 2016 12.43 3.85% 02 Dec 2015 14.26 -2.08% 02 Dec 2014 30 Nov 2016 11.96 0.34% 01 Dec 2015 14.56 1.59% 01 Dec 2014 29 Nov 2016 11.92 0.00% 30 Nov 2015 14.33 -1.39% 28 Nov 2014 28 Nov 2016 11.92 -1.00% 27 Nov 2015 14.53 -0.14% 26 Nov 2014 25 Nov 2016 12.04 1.17% 25 Nov 2015 14.55 0.00% 25 Nov 2014 23 Nov 2016 11.90 0.08% 24 Nov 2015 14.55 0.00% 24 Nov 2014 22 Nov 2016 11.89 0.84% 23 Nov 2015 14.55 -0.34% 21 Nov 2014 21 Nov 2016 11.79 0.25% 20 Nov 2015 14.60 0.21% 20 Nov 2014 18 Nov 2016 11.76 -0.93% 19 Nov 2015 14.57 0.76% 19 Nov 2014 Copyright 2018 CapitaLogic Limited
- 3. Example 2 Black-Scholesformula Equity price S0 12.13 Volatility σ 26.34% Risk-free rate r 1.6716% Strike price K 12.8 Time to maturity T 1 d1 -0.0089 d2 -0.2723 Φ(d1) 0.4964 Φ(d2) 0.3927 Call value c 1.0790 Copyright 2018 CapitaLogic Limited
- 4. Example 3 Merton'sdefault model Date 30 Dec 2016 31 Dec 2015 31 Dec 2014 Market value of equity E0 48,201 55,918 59,116 Equity volatility σE 26.34% 21.96% 21.08% Market value of assets A0 253,392 249,819 241,801 Total liabilities L 208,685 196,189 183,835 Asset volatility σA 8.32% 7.97% 8.25% Risk-free rate r 1.6716% 1.1711% 0.6268% Time to maturity T 1 1 1 d1 2.574286543 3.217224708 3.438936721 d2 2.491042643 3.137482113 3.356426414 Φ(d1) 0.994977648 0.999352814 0.999707998 Φ(d2) 0.993631558 0.999147972 0.999605216 exp(-rT) 0.983422738 0.988357153 0.993751292 Calc value of equity E0 48,201 55,918 59,116 Market value of assets A0 253,392 249,819 241,801 Book value of total liabilities L 208,685 196,189 183,835 Asset volatility σA 8.32% 7.97% 8.25% Time to maturity T 1 1 1 d1 2.574286543 3.217224708 3.438936721 d2 2.491042643 3.137482113 3.356426414 Φ(d2) 0.993631558 0.999147972 0.999605216 PD 1-Φ(d2) 0.6368% 0.0852% 0.0395% Copyright 2018 CapitaLogic Limited
- 5. Example 4 Balancesheet Ford Motor 30 Dec 2016 31 Dec 2015 31 Dec 2014 Assets Current Assets Cash And Cash Equivalents 15,905 14,272 10,757 Short Term Investments 22,922 20,904 20,393 Net Receivables 57,368 56,179 92,819 Inventory 8,898 8,319 7,870 Other Current Assets 3,368 2,913 2,913 Total Current Assets 108,461 102,587 131,839 Long Term Investments 53,228 48,778 3,357 Property Plant and Equipment 60,901 57,256 53,343 Goodwill Intangible Assets Accumulated Amortization Other Assets 5,656 4,795 6,052 Deferred Long Term Asset Charges 9,705 11,509 14,024 Total Assets 237,951 224,925 208,615 Liabilities Current Liabilities Accounts Payable 21,296 20,272 20,035 Short/Current Long Term Debt 49,669 42,975 42,975 Other Current Liabilities 19,316 19,089 19,089 Total Current Liabilities 90,281 82,336 20,035 Long Term Debt 93,301 89,879 119,171 Other Liabilities 24,395 23,457 44,032 Deferred Long Term Liability Charges 691 502 570 Minority Interest 17 15 27 Negative Goodwill Total Liabilities 208,685 196,189 183,835 Copyright 2018 CapitaLogic Limited
- 6. Example 5 Incomestatement Ford Motor 30 Dec 2016 31 Dec 2015 31 Dec 2014 Total Revenue 151,800 149,558 144,077 Cost of Revenue 135,488 131,409 131,903 Gross Profit 16,312 18,149 12,174 Operating Expenses Research Development Selling General and Administrative 12,196 10,502 11,842 Non Recurring Others Total Operating Expenses Operating Income or Loss 4,116 7,647 332 Income from Continuing Operations Total Other Income/Expenses Net 1,794 1,560 424 Earnings Before Interest And Taxes 7,690 11,025 2,031 Interest Expense 894 773 797 Income Before Tax 6,796 10,252 1,234 Income Tax Expense 2,189 2,881 4 Minority Interest 17 15 27 Net Income From Continuing Ops 6,376 9,191 2,506 Non-recurring Events Discontinued Operations Extraordinary Items Effect Of Accounting Changes Other Items Net Income 4,596 7,373 1,231 Copyright 2018 CapitaLogic Limited
- 7. Example 6 Financialratio 30 Dec 2016 31 Dec 2015 31 Dec 2014 30 Dec 2016 31 Dec 2015 31 Dec 2014 Current assets 108,461 102,587 131,839 Current ratio 1.201371 1.245956 6.580434 Current liabilities 90,281 82,336 20,035 Cash 15,905 14,272 10,757 Quick ratio 1.065507 1.109539 6.187622 Marketable securities 22,922 20,904 20,393 Accounts receivable 57,368 56,179 92,819 Current liabilities 90,281 82,336 20,035 Cash 15,905 14,272 10,757 Cash ratio 0.430068 0.427225 1.554779 Marketable securities 22,922 20,904 20,393 Current liabilities 90,281 82,336 20,035 Total liabilities 208,685 196,189 183,835 L to E ratio 7.154096675 6.84969625 7.522505933 Total equity 29,170 28,642 24,438 Total liabilities 208,685 196,189 183,835 L to A ratio 0.877008292 0.872241858 0.881216595 Total assets 237,951 224,925 208,615 Total equity 29,170 28,642 24,438 E to A ratio 0.122588264 0.127340225 0.117144021 Total assets 237,951 224,925 208,615 EBIT 7,690 11,025 2,031 ROA 0.032317578 0.049016339 0.009735637 Total assets 237,951 224,925 208,615 EBIT 7,690 11,025 2,031 ROE 0.263627014 0.384924237 0.083108274 Total equity 29,170 28,642 24,438 EBIT 7,690 11,025 2,031 ROCE 187.5609756 268.902439 50.775 Total common equity 41 41 40 Copyright 2018 CapitaLogic Limited
- 8. Example 7 Listedmanufacturing GICS Sector GICS Sub Industry Security Ticker symbol Date first added Consumer Discretionary Auto Parts & Equipment BorgWarner BWA 19 Dec 2011 Consumer Discretionary Auto Parts & Equipment Delphi Automotive PLC DLPH 24 Dec 2012 Consumer Discretionary Automobile Manufacturers Ford Motor F Consumer Discretionary Automobile Manufacturers General Motors GM 06 Jun 2013 Consumer Discretionary Home Furnishings Leggett & Platt LEG Consumer Discretionary Home Furnishings Mohawk Industries MHK 23 Dec 2013 Consumer Discretionary Household Appliances Snap-On Inc. SNA 30 Sep 1982 Consumer Discretionary Household Appliances Stanley Black & Decker SWK 30 Sep 1982 Consumer Discretionary Household Appliances Whirlpool Corp. WHR Consumer Discretionary Housewares & Specialties Newell Brands NWL 30 Apr 1989 Consumer Discretionary Leisure Products Hasbro Inc. HAS 30 Sep 1984 Consumer Discretionary Leisure Products Mattel Inc. MAT 31 Mar 1982 Consumer Discretionary Motorcycle Manufacturers Harley-Davidson HOG Consumer Discretionary Tires & Rubber Goodyear Tire & Rubber GT Consumer Staples Agricultural Products Archer-Daniels-Midland Co ADM 29 Jul 1981 Consumer Staples Brewers Molson Coors Brewing Company TAP 30 Jun 1976 Consumer Staples Distillers & Vintners Brown-Forman Corp. BF.B 31 Oct 1982 Consumer Staples Distillers & Vintners Constellation Brands STZ 05 Jul 2005 Consumer Staples Household Products Church & Dwight CHD 29 Dec 2015 Consumer Staples Household Products Colgate-Palmolive CL Consumer Staples Household Products Kimberly-Clark KMB Consumer Staples Household Products The Clorox Company CLX 31 Mar 1969 Consumer Staples Packaged Foods & Meats Campbell Soup CPB Consumer Staples Packaged Foods & Meats Conagra Brands CAG 31 Aug 1983 Consumer Staples Packaged Foods & Meats General Mills GIS 31 Mar 1969 Consumer Staples Packaged Foods & Meats Hormel Foods Corp. HRL 04 Mar 2009 Consumer Staples Packaged Foods & Meats JM Smucker SJM 06 Nov 2008 Consumer Staples Packaged Foods & Meats Kellogg Co. K Consumer Staples Packaged Foods & Meats Kraft Heinz Co KHC 06 Jul 2015 Consumer Staples Packaged Foods & Meats McCormick & Co. MKC Copyright 2018 CapitaLogic Limited
- 9. Example 8 Altman'sZ-score 30 Dec 2016 31 Dec 2015 31 Dec 2014 30 Dec 2016 31 Dec 2015 31 Dec 2014 Market value of equity 48,201 55,918 59,116 X1 0.230976 0.285021 0.321570 α1 0.6 Total liabilities 208,685 196,189 183,835 Current assets 108,461 102,587 131,839 X2 0.076402 0.090034 0.535935 α2 1.2 Current liabilities 90,281 82,336 20,035 Total assets 237,951 224,925 208,615 Retain earnings 15,634 14,414 9,422 X3 0.065703 0.064084 0.045165 α3 1.4 Total assets 237,951 224,925 208,615 EBIT 7,690 11,025 2,031 X4 0.032318 0.049016 0.009736 α4 3.3 Total assets 237,951 224,925 208,615 Total revenue 151,800 149,558 144,077 X5 0.637946 0.664924 0.690636 α5 0.999 Total assets 237,951 224,925 208,615 Z-score 1.066208 1.194784 1.621367 Copyright 2018 CapitaLogic Limited
- 10. Example 9 Altman'sZ'-score Ford 30 Dec 2016 31 Dec 2015 31 Dec 2014 30 Dec 2016 31 Dec 2015 31 Dec 2014 Book value of equity 29,170 28,642 24,438 X1 0.139780 0.145992 0.132934 α1 0.42 Total liabilities 208,685 196,189 183,835 Current assets 108,461 102,587 131,839 X2 0.076402 0.090034 0.535935 α2 0.717 Current liabilities 90,281 82,336 20,035 Total assets 237,951 224,925 208,615 Retain earnings 15,634 14,414 9,422 X3 0.087660 0.080820 0.052829 α3 0.847 Total assets 178,348 178,348 178,348 EBIT 7,690 11,025 2,031 X4 0.043118 0.061817 0.011388 α4 3.107 Total assets 178,348 178,348 178,348 Total revenue 151,800 149,558 144,077 X5 0.851145 0.838574 0.807842 α5 0.998 Total assets 178,348 178,348 178,348 Z'-score 1.171146 1.223289 1.326452 Copyright 2018 CapitaLogic Limited
- 11. Example 10 Altman'sZ"-score Microsoft 30 Dec 2016 31 Dec 2015 31 Dec 2014 30 Dec 2016 31 Dec 2015 31 Dec 2014 Book value of equity 71,997 80,083 89,784 X1 0.591609 0.848436 1.086973 α1 1.05 Total liabilities 121,697 94,389 82,600 Current assets 139,660 122,797 114,246 X2 0.414587 0.419265 0.398071 α2 6.56 Current liabilities 59,357 49,647 45,625 Total assets 193,694 174,472 172,384 Retain earnings 2,282 9,096 17,710 X3 0.011781 0.052134 0.102736 α3 3.26 Total assets 193,694 174,472 172,384 EBIT 19,751 18,507 27,820 X4 0.101970 0.106074 0.161384 α4 6.72 Total assets 193,694 174,472 172,384 Z"-score 4.064526 4.524014 5.172083 Copyright 2018 CapitaLogic Limited
- 12. Example 11 Consolidatedassessment 30 Dec 2016 31 Dec 2015 31 Dec 2014 Credit rating BBB BBB BBB Merton's model 0.6368% 0.0852% 0.0395% Altman's Z-score 1.0662 1.1948 1.6214 Credit rating Good Same Good Same Good Merton's model Good Deteriorating Good Deteriorating Good Altman's Z-score Bad Deteriorating Bad Deteriorating Bad Overall Credit quality Good Moderate Good Relative position Lower end of Good Credit rating BBB BB BBB Relative position Lower end of BBB PD 0.3345% 2.5652% 0.3345% In between Copyright 2018 CapitaLogic Limited
- 13. Example 12 EDGAR10-K form CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) shares in Millions, $ in MillionsDec. 31, 2016 Dec. 31, 2015 ASSETS Allowance for trade and other receivables 392 372 Common Stock [Member] EQUITY Common stock, par value (in dollars per share) 0.01 Common Stock, shares issued (in shares) 3976 Common Stock, Shares Authorized (in shares) 6000 Class B Stock [Member] EQUITY Common stock, par value (in dollars per share) 0.01 Common Stock, shares issued (in shares) 71 Common Stock, Shares Authorized (in shares) 530 Copyright 2018 CapitaLogic Limited