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28 Cyclical component: sale of stock Year Bottom 25% Bottom 5% Bottom 99% Real GDP Cyclical component: real GDP

29 Cyclical component: issues of long term debt Year Cyclical component: real GDP Cyclical component: change in liabilities Year Cyclical component: real GDP Bottom 25% Bottom 5% Bottom 99% Real GDP Bottom 25% Bottom 5% Bottom 99% Real GDP

30 Percentage deviations Aggregate output Prototype Only debt Frictionless Absolute deviations (bp) Default rate % deviation Output of all firms λ = 1 λ = 2 1 λ = 4 1 Frictionless Years Absolute deviation (bp) Default rate of all firms Years Percentage deviations Output of small firms Output of large firms Absolute deviations (bp) 1 5 Default rate of small firms Default rate of large firms % deviation Output of small firms Years Output of large firms Absolute deviation (bp) Default rate of small firms Years Default rate of large firms Percentage deviations Years Absolute deviations (bp) Years % deviation Years Absolute deviation (bp) Years

31 Equity issues by firm size % deviations Equity Small firms, λ 1 = 2 Small firms, λ 1 = 4 Large firms, λ 1 = 2 Large firms, λ 1 = Years % deviations Debt Years Cyclical component: equity issues Year Bottom 25% Bottom 5% Bottom 99% Aggregate output Cyclical component: aggregate output 6 Net worth Dividends of large firms Debt issues by firm size % deviations Years % deviations λ 1 = 2 λ 1 = 4 λ 1 = Years Cyclical component: debt issues Year Cyclical component: aggregate output Bottom 25% Bottom 5% Bottom 99% Aggregate output

Vertical and Horizontal Analysis. Financial Analysis. Lecturer: Dr. Constantinos Adamides

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