As a credit manager in the counterparty risk department of a major financial institution, you utilize a simplified version of the Merton model to assess the vulnerability of your top counterparties to changes in their market value and financial stability. Your task is to rank three specific counterparties—Company P, Company Q, and Company R—based on their likelihood of default over the next year.

To determine this ranking, you need to consider the following provided data:

1. Market value of assets
2. Face value of debt
3. Annual volatility of asset values

Assume that the only financial obligation for each company is a zero-coupon bond maturing in one year. Use the approximation formula for the distance to default to complete your analysis.