Daily Archives: December 6, 2014

How reliable are companies’ credit ratings?

What is a financially safe company? Is it one that is nearly debt-free and earns over 20 per cent returns on capital employed (RoCE) in its business; or one with a debt-to-equity ratio of around one and of around 10 per cent? Or is it a company with the leverage ratio of more than three and RoCE in a low single digit? If in India are to be believed, all three are equally safe with little or no chance of default on their debt.

Read full post