Data Update 7 for 2020: Debt Delusions and Reality
aswathdamodaran.substack.com
In the midst of a crisis, it is very difficult to think about life in its aftermath, but there will come a time, when investors and companies will shift their focus. To be able to do so, they have to survive the crisis, and for many companies, that has become the immediate challenge. In the last post, I looked at one factor that will determine survival risk, and that is the buffer than companies have on growth, profitability and reinvestment, with companies in higher margin businesses being more protected than companies in businesses with slim or negative margins. In this one, I look at the other factor that will determine survival and that is the debt burden on firms, since companies with higher debt burdens, other things remaining equal, will be more exposed to failure and distress than companies without those burdens. I will look at the degree of indebtedness of companies around the world, broken out by industry and region, partly with an eye on assessing how much danger they are exposed to right now, as their near term business prospects collapse, and partly to see which firms, industries and regions are best positioned to make it through this crisis.
Data Update 7 for 2020: Debt Delusions and Reality
Data Update 7 for 2020: Debt Delusions and…
Data Update 7 for 2020: Debt Delusions and Reality
In the midst of a crisis, it is very difficult to think about life in its aftermath, but there will come a time, when investors and companies will shift their focus. To be able to do so, they have to survive the crisis, and for many companies, that has become the immediate challenge. In the last post, I looked at one factor that will determine survival risk, and that is the buffer than companies have on growth, profitability and reinvestment, with companies in higher margin businesses being more protected than companies in businesses with slim or negative margins. In this one, I look at the other factor that will determine survival and that is the debt burden on firms, since companies with higher debt burdens, other things remaining equal, will be more exposed to failure and distress than companies without those burdens. I will look at the degree of indebtedness of companies around the world, broken out by industry and region, partly with an eye on assessing how much danger they are exposed to right now, as their near term business prospects collapse, and partly to see which firms, industries and regions are best positioned to make it through this crisis.