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| Author: | Miles, J. A. Varma, R. |
| Title: | Using financial market data to make trade credit decisions. |
| Journal: | Journal of Business Finance and Accounting
1986 : WINTER, VOL. 13:4, p. 505-518 |
| Index terms: | CREDIT MANAGEMENT TRADE NET PRESENT VALUE STOCK MARKETS |
| Language: | eng |
| Abstract: | Most firms sell on credit to other firms. The buyer promises to make a future cash payment in exchange for receiving the goods immediately. A procedure for making credit decisions based on financial market data is outlined. The option pricing application shows how to use option pricing theory to value firm's debt. The presented insight is that observed equity value is sufficient for deducing the value of debt claims on the firm's assets. For a credit applicant with publicly traded stock,an analyst need only observe the stock price,the member of shares outstanding and the historic equity return. |
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