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Analysts are also interested in the current financial position of a company. The financial position can be measured by comparing the resources controlled by the company (assets) in relation to the claims against those resources (liabilities and equity). An example of a resource is cash. In Example 1, if no other transactions occur, the company should have €230,000 more in cash at 31 December 2009 than at the start of the period. The cash can be used by the company to pay its obligation to the supplier (a claim against the company) and may also be used to make distributions to the owner (who has a residual claim against the company’s assets, net of liabilities). Financial position is particularly important in credit analysis, as depicted in Exhibit 2. Panel A of the exhibit is an excerpt from an April 2010 announcement by a credit rating agency of an upgrade in the credit ratings of Teck Resources Ltd., a Canadian mining company. The rating agency explained that it upgraded the credit rating of the company (its “corporate credit rating”) and the credit rating of the company’s debt securities (the “issue-level rating”) because the company had repaid its debt quickly (“accelerated debt repayment”). Panel B of the exhibit is an excerpt from the company’s second quarter 2010 earnings announcement in which the company’s CEO describes the company’s repayment of debt. Panel C of the exhibit is an excerpt from the company’s financial report illustrating the change in the company’s financial position in June 2010 compared with December 2009. As shown, the amount of the company’s debt liabilities relative to the amount of its equity declined substantially over the period.


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