ASSESSMENT OF THE DEBT BURDEN ON COMPANIES IN THE CONSUMER INDUSTRY
In the context of declining profitability of companies, it is necessary to assess their financial condition. The level of debt burden formed in the past puts pressure on the financial performance of companies at the present time. The source of repayment of borrowed capital is primarily income from the main activity of the borrower, and not cash flow from the project or property. In this context, assets pledged as collateral mitigate risks and are a secondary source of debt repayment. Therefore, companies need to have an optimal and stable level of income in order to be financially stable. In this regard, it is necessary to analyze the extent to which companies are able to service their debt obligations. Along with the basic indicators, it is proposed to analyze an adjusted indicator of the interest coverage ratio, which is based on the profit for the company’s core business, not including other income.
Keywords: “zombie company”, creditworthiness, debt capital market, consumer industry, monetary policy.
Highlights:
♦ a sample analysis of consumer industry companies was conducted;
♦ conclusions are made about the presence of the industry’s credited companies;
♦ the reasons for the need to analyze the interest coverage ratio (ICR);
♦ recommendations for improving the ICR indicator for companies are presented.
Stepan Yu. Korovin, Post-graduate student of the The Russian Presidential Academy of National Economy and Public Administration (Ranepa), Moscow.