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

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5. Behind the Numbers: Adjusted Debt and Liquidity

Introduction

Having made our criticisms of the role played by an over-reliance on numerical analysis, in this chapter we promptly reverse tack and acknowledge the importance of interpreting these very numbers – properly. Our stance here is not to advocate the literal application of numerical analysis, but rather to use it in a more interpretative fashion. In order to do this, we give a number of case studies in which we tease out contextual factors that can either support or undermine the credit case for the corporate concerned. We take each part of the financial statements in turn: P&L, balance sheet and cash flow statement, and highlight areas that merit particular scrutiny from the investor. ...

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