In the highest risk S&P category of CCC/C,about 60% of the firms default within a year.

S&P Category

A classification system used by Standard & Poor's to categorize and evaluate stocks or other securities based on their sector or characteristics.

CCC/C

A credit rating symbol used by rating agencies to denote a high risk of default; regarding bonds or loans, it signifies very poor credit quality.

Default Rate

The percentage of borrowers who fail to make payments on their debts or loans as agreed, leading to a default status.

Familiarize with the utilization of financial analytical tools and the shortcomings of financial ratios.

Verified Answer

Final Answer :

False

Explanation :

According to the data from the rating agency Standard & Poor's, the one-year default rate for CCC/C-rated firms is around 30%, not 60%.

Learning Objectives

Familiarize with the utilization of financial analytical tools and the shortcomings of financial ratios.