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International Journal of Academic Research in Business and Social Sciences

Open Access Journal

ISSN: 2222-6990

A Comparative Study of Credit Risk in Different Companies of Different Sectors in Pakistan

Mahboob SHAH, Hafiz ULLAH, Sana KHALID

Open access

The corporate data used in this portion is taken from annual report of different
companies in their respected sector. The data taken was of three year, from
2008-2010 of different company from seven different sectors, namely Textile,
Cement, Fertilizer, Refinery, Chemical, Automobile and Electrical and
Mechanical. After using data in the company annual report we have find
different ratio which clearly indicate a company weak and strong point. The
different ratio used in this analysis is return on asset ratio, quick ratio, current
liabilities to total liabilities, and Total liabilities to total assets, total debt to total
assets and interest coverage ratio. In corporate stress we find new interest
coverage ratio after a supposed increase of 4% in interest expense, and in
earning shock new interest coverage ratio by a supposed decrease of 25% in
earning. In bank stress we find the effect of textile and cement sector on bank
capital, NPLs, Provision and then find capital adequacy ratio, non performing
loan ratio and return on asset ratio of bank and its increase decrease, if the
sector are unable to pay its loan.