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Morgan Stanley  (NYSE:MS) Financial Strength: 4 (As of Sep. 2017)

Morgan Stanley has the Financial Strength Rank of 4.

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors:

1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.
2. Debt to revenue ratio. The lower, the better.
3. Altman Z-Score.

Morgan Stanley's Interest Coverage for the quarter that ended in Sep. 2017 was 1.59. Morgan Stanley's debt to revenue ratio for the quarter that ended in Sep. 2017 was 20.96. Altman Z-Score does not apply to banks and insurance companies.

Calculation

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:

Morgan Stanley's Interest Expense for the months ended in Sep. 2017 was \$-1,557 Mil. Its Operating Income for the months ended in Sep. 2017 was \$2,482 Mil. And its Long-Term Debt & Capital Lease Obligation for the quarter that ended in Sep. 2017 was \$191,677 Mil.

Morgan Stanley's Interest Coverage for the quarter that ended in Sep. 2017 is

 Interest Coverage = -1 * Operating Income (Q: Sep. 2017 ) / Interest Expense (Q: Sep. 2017 ) = -1 * 2482 / -1557 = 1.59

The higher the ratio, the stronger the company's financial strength is.

2. Debt to revenue ratio. The lower, the better.

Morgan Stanley's Debt to Revenue Ratio for the quarter that ended in Sep. 2017 is

 Debt to Revenue Ratio = Total Debt (Q: Sep. 2017 ) / Revenue (Q: Sep. 2017 ) = (Current Portion of Long-Term Debt + Long-Term Debt & Capital Lease Obligation) / Revenue = (1087 + 191677) / 9197 = 20.96

3. Altman Z-Score.

Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.

The zones of discrimination were as such:

When Z-Score is less than 1.81, it is in Distress Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey Zones.

Altman Z-Score does not apply to banks and insurance companies.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

The maximum rank is 10. Companies with rank 7 or higher will be unlikely to fall into distressed situations. Companies with rank of 3 or less are likely in financial distress.

Morgan Stanley has the Financial Strength Rank of 4.

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