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Question:
(a)
i. Expected loss= Exposure amount* probability of default* loss given default
ii. Positive covenants= covenants that showing the direction to a company. Positive covenants are affirmative and helps the company to set the right strategy.
iii. Securitization- technique of bundling and off-loading risks that a financial institution does not want to maintain in his books.
(b) Covenants help mitigate credit risk. Covenants are terms and conditions attached to a facility. Any breach of covenant may result in the Bank recalling facilities.
Types of covenants: working capital ratios; leverage; tangible net worth; dividend and capital expenditure restrictions; cash flow covenants.
Rules: Keep it simple; Focus on the borrower; Set the appropriate covenant level; Don't underestimate term risk; Never waiver; Keep records.
calculate npv
project work on factor affecting capital structure.
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Jackson Corporation prepared the following book income statement for its year ended December 31, 2011: Sales
#Minimum 100 words accepted#
develop a corporate finance project and dissices all ground of financials areas
what does it actually means
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