FSA

Assignment: 3

1. Comment on the assertion “Debt is a supplement to, not a substitute for equity financing”.
2. Why is debt securities rated while equity securities are not?
3. What factors do rating agencies emphasize in rating an industrial bond? Describe these factors.
4. What is the reason why companies hire bond rating agencies to rate their debt?
5. Since cash does not generally yield a return, why does a company hold cash?
6.
a. Describe four ways in which management can window-dress the financial statements to
accomplish this objective.
b. For each technique described in (a) describe how you can detect window-dressing.