Value investing · Course 9 of 39 · Judging a business
Credit for equity investors
Who gets paid first, what bonds and spreads say about a company, how covenants and ratings bind it, and how distress unfolds, read from the last seat in line.
For a shareholder who wants to see a company's debt the way its lenders see it. Every share is a claim behind every one of them, and that order decides what is left over in the years it matters most.
After it you can rank a company's claims from secured lender to common shareholder, and read a bond's price and spread as the credit market's own view of the risk. You can find a company's covenants and know how close it runs to one, and place its credit rating and Altman Z-Score. You can also follow what a Chapter 11 filing actually does to each layer of claims, and why the shareholder is usually the one left with nothing.
It assumes Accounting quality and Financial health, and the ratios in Financial health are the raw material a credit view is built from.
The test, not the verdict
Credit for equity investors is 7 lessons on the tests and where their lines sit. Whether a company you hold clears one of them is a separate question that needs its filings read, and nothing on these pages has read them.
See our methodology for how the product reads a filing and what it refuses to compute.