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credit risk


Hi folks

Need some real world advice. How do I get myself into a credit risk position? How relevant is M&A experience beneficial to credit risk or is it beneficial? I am seeing some M&A positions but they are all very different forms of M&A. Some are doing analysis on M&A while others are searching data and news on M&A.


Well-Known Member
Credit risk is determining the financial position of the company that is how strong is firm's repaying capacity, what the nature of debt taken by the firm and how it is paying the debt. it is important to know the financial ratios of the firm and various margins. for this you should know the firm inside out. So that one can assess the firm's capacity to pay and probability of financial distress. certain leverage ratios like interest coverage ratio gives indication to pay interest well in time. So understanding firm is same as the when we analyses firm for merger with some other firm. One need to know what are the operating, financial assets and operations of the firm so knowing the firm and its business is very essential in M&A. once you know what the firm worth truly is based on its operations and financial position one can take judgement on whether it is a possible target for acquisition. So in some way you are assessing firm's fundamentals when you are either analyzing firm for credit risk or when you are valuing the firm for M&A.
So I think there there should be many common areas that could be possible between M&A and credit risk related work so that it ultimately boils down to assessing firm's fundamentals.Although they have very different objectives but means of achieving those have several methods in which majority of methods might be common to both areas of M&A and credit risk. You will definitely get help from your work ex in M&A in credit risk.