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Opening Credit: A practitioner's guide to credit investment by Justin McGowan, Duncan Sankey

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4. How Managements Present Reality

Introduction

In this section we attempt to move on from the traditional application of financial metrics in credit analysis and, armed with an awareness of the governance factors to complement these skills, examine some of the ways in which management’s presentation of financial data can frustrate the analyst’s attempt to assess a company’s creditworthiness.

Initially, we have to turn back to the numbers. Here we discuss management’s options and motivations in presenting the figures that they submit for public scrutiny. We spend some time on sell-side practitioners’ efforts further to emphasise the supremacy of numbers. We then link this theme to our scepticism over the real value of long-term corporate financial ...

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