d-8) Moody's considers a number of items when assigning credit ratings for the global aero- space...

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d-8) Moody's considers a number of items when assigning credit ratings for the global aero- space and defense industry, including quantitative measures of three broad factors: size and scale; business profile, revenue sustainability, and efficiency; and financial leverage and flexibility. A company's ratings for each of these factors are weighted and aggregated in determining the overall credit rating assigned. The broad factors, the sub-factors, and weightings are as follows: Broad Factor Size and scale Business profile, revenue sustainability, and efficiency Total Financial leverage and flexibility Sub-Factors Total revenue Operating profit Expected business profile (e.g. prime contractor versus easily replaced small supplier) Revenue visibility (backlog/revenue) Revenue protection (competitive factors, :c.g.. barriers to entry) EBITA/Average assets Debe/EBITDA Free cash Bow/Net debt Retained cash Bow/Debt Cash and marketable securities/ Debt EBIT/Interest Sub-Factor Weighting (%) 10 15 10 5 5 5 10 10 10 10 10 100 Broad Factor Weighting (%) 25 25 50 100 1. What are some reasons why Moody's may have selected these three broad factors as being important in assigning a credit rating in the aerospace and defense industry? 2. Why might financial leverage and flexibility be weighted so heavily? d-8) Moody's considers a number of items when assigning credit ratings for the global aero- space and defense industry, including quantitative measures of three broad factors: size and scale; business profile, revenue sustainability, and efficiency; and financial leverage and flexibility. A company's ratings for each of these factors are weighted and aggregated in determining the overall credit rating assigned. The broad factors, the sub-factors, and weightings are as follows: Broad Factor Size and scale Business profile, revenue sustainability, and efficiency Total Financial leverage and flexibility Sub-Factors Total revenue Operating profit Expected business profile (e.g. prime contractor versus easily replaced small supplier) Revenue visibility (backlog/revenue) Revenue protection (competitive factors, :c.g.. barriers to entry) EBITA/Average assets Debe/EBITDA Free cash Bow/Net debt Retained cash Bow/Debt Cash and marketable securities/ Debt EBIT/Interest Sub-Factor Weighting (%) 10 15 10 5 5 5 10 10 10 10 10 100 Broad Factor Weighting (%) 25 25 50 100 1. What are some reasons why Moody's may have selected these three broad factors as being important in assigning a credit rating in the aerospace and defense industry? 2. Why might financial leverage and flexibility be weighted so heavily?

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The image youve provided shows a table that outlines the criteria used by Moodys to assign credit ratings for the global aerospace and defense industry This table lists three broad factors Size and Sc... View the full answer