The company fundamental analysis and the default risk ratio
The default risk ratio (DRR) proposed in this paper tries to define a novel alternative approach to analyze the company capability to face debt obligation by deriving it on the basis of fundamental analysis of the firm rather than the volatility of the asset’s value on the market.
The DRR is defined on the basis of the relationship between debt level and the economic and financial dynamics with regard the Operating and Net Income, Capital Invested and Capital Structure and Free Cash-Flow from Operations and to Equity.