Understanding Debt in the Balance Sheet
Was told to understand the role of "debt in the balance sheet", and the "bond side of the balance sheet". I was unsure about how to go about educating myself in these areas. Any insight about these areas or any pointers would be really helpful!
Anything helps!
I work at a distressed focused hedge fund, so we focus a ton of our time on investing in distressed debt securities.
Would go through and learn basic bond math by searching online. Learn how to calculate YTM, current yield, etc. all the key metrics essentially, and understand all the various terms associated with debt instruments (coupon rate, maturity, etc.).
Learn how to put a capitalization table together as well. Would look at valuation on both an EBITDA and EBITDA-Capex basis. Usually you want to include all the key metrics I mentioned above as well as what the valuation is through each tranche of debt. Learn how to figure out who is first in line to get paid in a bankruptcy (ie. what tranche is more senior) or if tranches of debt are pari passu.
In general, you can google around to learn the basics of debt or go through various company's filings to understand how they describe the debt on the balance sheet.
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