Grifols, S. A., is a Spanish pharmaceutical company focusing on the development, manufacturing, and sale of therapeutic products. At the end of 2013, Grifols was rated €œ BB€ by Standard & Poor€™s and considered to have a stable business risk profile.

Required
a. What is a credit rating and why would a potential investor in bonds be interested in a company€™s credit rating?
b. What type of factors does a credit rating agency consider in rating a company?
c. Compute funds from operations over debt and debt to EBITDA for 2012 and 2013 using the selected financial statement information above.
d. Using the benchmarks from Exhibit 14.9, assess the financial risk of the company using these indicators. Assess its financial risk profile at the end of 2013. How does 2013 compare to 2012?

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December 31 2013 Grifols, S.A. ( in thousands) Operating income from continuing operations ater tax Operating profits before interest inoome, interest expense, and income taxs 738,120 660,084 Depreciation and amortization Deferred income tax expense Asset impairment losses (gains) Major non-cash charges (gains) Short-tem debt Long-term debt Equity 2012 E 342,054 255,377 129,126 97018 1,442) 1,774 189,335 2,437,976 2.585988 2,10204 1.890,741 128,469 14,992 271 4,873 248,705