Analysis of General Obligation (GO) Bonds
Chapters in this video
- 0:00 What backs a GO bond: full faith, credit, and taxing power
- 0:40 Evaluating issuer vital signs: population, employment diversity, property values
- 2:12 Peeling the debt onion: total direct debt minus self-supporting debt
- 3:13 The overlapping debt trap: why state debt is excluded
- 4:07 Four GO credit ratios analysts rely on
- 5:10 Shrinking population plus fixed debt: why ratios always worsen
- 5:41 Rapid-fire exam recap
What this video covers
- What backs a general obligation (GO) bond versus a revenue bond, and why the distinction is the first line of defense on exam day
- How to calculate net direct debt by subtracting self-supporting revenue bonds from total direct debt
- Why overlapping debt only includes local taxing authorities such as counties and school districts, and why state debt is permanently excluded
- How to compute net overall debt by adding overlapping debt to net direct debt
- The four GO credit ratios: net debt to assessed valuation, net debt per capita, debt service to total budget, and tax collection ratio
- Why a declining population or falling assessed valuations will worsen debt ratios, not improve them
- Why a tax collection ratio near 100% is a strong positive credit indicator, and what a low ratio signals
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