Corporate debt and the economy
Description
Why do you think firms in each industry tend to have similar debt ratios (and/or debt-to-equity)?
What are the risks, related to debt, facing firms when their revenues drop significantly?
Consider the effect of the COVID-19 recession compared to the pre-COVID period. Although we are now in recovery, the data aren’t easily available yet. If we look at a firm’s 2019 EBI, its interest payments , and interest coverage ratio and compare it to the 2020 interest coverage ratio, what would we expect to see? How does the firm’s industry factor in here?
2019 and 2020 annual data would represent the pre-crisis and full crisis situations.Using news articles that discuss a specific firm or industry to illustrate your point.
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