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Corporate Debt: Difference between revisions
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== Health Profile == | == Health Profile == | ||
''Fathom Consulting is a London research firm, that classifies all quoted US companies by their [https://www.investopedia.com/terms/a/altman.asp Altman Z-scores] — a measure promulgated by the New York University professor Edward Altman to estimate how close they were to bankruptcy. It combines concepts such as account profitability, leverage, liquidity, solvency, and activity ratios.'' | ''Fathom Consulting is a London research firm, that classifies all quoted US companies by their [https://www.investopedia.com/terms/a/altman.asp Altman Z-scores] — a measure promulgated by the New York University professor Edward Altman to estimate how close they were to bankruptcy. It combines concepts such as account profitability, leverage, liquidity, solvency, and activity ratios.'' | ||
In the last century, more than half of all public companies looked strong and healthy on Altman’s metric. That number has now dropped below 10% for the first time on record | |||
[[File:E1b3deaebd25b2f5c610e786a97aa71beac10aaf.png|center|thumb|641x641px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]] | [[File:E1b3deaebd25b2f5c610e786a97aa71beac10aaf.png|center|thumb|641x641px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]] | ||
[[File:D0466af4f2901361ce2185559b39ec9ebc9f9b69 2 775x457.jpeg|center|thumb|650x650px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]] | [[File:D0466af4f2901361ce2185559b39ec9ebc9f9b69 2 775x457.jpeg|center|thumb|650x650px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]]This chart defines zombies loosely as companies whose earnings before interest and tax did not cover their interest costs for one year, and also on a stricter basis where this situation needs to have persisted for at least three consecutive years. By this standard, slightly more than a fifth of US companies are zombies:[[File:822ec3bb867bed3bceeb18b45a26a80cbdb95ddd 2 775x508.jpeg|center|thumb|664x664px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]]In this chart from Bank of America, which gauges balance street strength with the simple measure of the cover they have to pay interest charges, we discover that the biggest 150 companies have barely ever been stronger on this metric. Smaller companies are dramatically weaker, and have seen a significant weakening over the last two years | ||
[[File:822ec3bb867bed3bceeb18b45a26a80cbdb95ddd 2 775x508.jpeg|center|thumb|664x664px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]] | [[File:Screenshot 2023-12-08 103848.png|center|thumb|686x686px|https://www.bloomberg.com/opinion/articles/2023-12-06/corporate-defaults-companies-are-going-broke-gradually-not-suddenly?leadSource=uverify%20wall]] | ||
== References == | == References == | ||