1. What are the key business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the perspective of the credit analyst or bond holder.UST Inc. is a smokeless tobacco company with a long tradition and a recognizable brand. A strong brand can have many associations with high quality, revenue, strength, growth, etc. But this is one of the characteristics that can be like a double-edged grass. On the one hand, a company with a long tradition is expected to operate as stably and prosperously as it always has, but on the other hand, the company itself can become overconfident and fail to see newcomers ​and other threats. UST ignored the newcomers and now all of them have growing market shares, while only the total share of UST Inc., as a result, decreases. Smaller operators are expanding their market share mainly by cutting prices, something the UST has ignored. UST Inc. has decided to fight the competition not by decreasing prices, but by overextending its product lines. However, this may not be the best solution. Being the major players in the market, they were better positioned to face and win the price war. If UST Inc. had been able to take this step, its competitors would likely not be able to follow UST Inc.'s price reduction and at least some of them would have gone out of business. So, as one of the biggest drawbacks of UST policy can be a slow reaction to new market conditions, and worse, when they do react, the reaction is inappropriate. However, the financial situation of the company plays a very important role in the bondholder's decision and this company has been one of the most profitable companies in America in terms of ROE, ROA and gross profit margin. Aside from declining earnings and cash flow in 1997, UST has seen continued increases in sales (10-year compound annual growth rate of 9%), earnings (11%), and cash flow (12 %). They are generating their cash flows from operations. Thanks to premium pricing, they are making an above-average gross profit margin. Over the years, therefore, UST's revenues are stable and positive, and in general its balance sheets are positive. The company has no cash flow problems. However, there is no product differentiation. This can be a negative for the company, as lawsuits against the tobacco industry are increasing and pose a growing threat to the company.