Bankruptcy Predictor Model Message Board

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Strategies & Market Trends : Bankruptcy Predictor Model

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To: John Liu who wrote (152)	3/26/1999 9:34:00 AM
From: Razorbak	of 477

Credit Ratings for Public Debt / MVE for Private Companies... John: Absolutely. When investing in a distressed stock, it is always a good idea to look at the credit rating, if the debt is publicly traded, but this is not always the case for every stock. Sometimes you have to work around it. Similarly, when analyzing private companies, you have to work around not having a market value for the equity (MVE). For non-public companies, book value of equity can often be negative. For public companies, market value of equity cannot be below zero and is generally greater than book value. For this reason, Altman changed the lower limit of the ratio for non-public companies to 1.23. Good questions. Thanks for your input. Razor

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