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CFA Level 1 Question of the Week - Fixed Income

The two primary categories of ratios used for credit analysis are:
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CFA Level 1 Question of the Week - Fixed Income 10 votes

A. leverage and coverage ratios.
60% 6 votes
B. operating and financial ratios.
40% 4 votes
C. profitability and liquidity ratios.
0% 0 votes

Comments

  • Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 112 Associate
    The correct answer is A.

    The two primary categories of ratios used for credit analysis are leverage and coverage ratios.

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet financial obligations.

    A coverage ratio is a measure of a company's ability to meet its financial obligations. In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders.
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