Distance-to-default is the expected difference between the asset value of the firm relative to the default barrier, after correcting and normalizing for the volatility of assets. It approximates the number of standard deviations to reach the default threshold; thus, the higher the DtD, the least likely to default.

$$\text{DtD} = \frac{\ln V_\alpha - \ln F + (\mu - \frac{\sigma^2_\alpha}{2})}{\sigma_\alpha \sqrt{t}}$$

DtD can be simplified by reducing the forward time periods to 1 (t=1) and minimizing the drift factors $(\mu - \frac{\sigma}{2})$ that tend to be small (assumed to equal 0) over one period to yield:

$$\text{DtD} \cong \frac{\ln V_\alpha - \ln F}{\sigma_\alpha}$$

Applying this formula,

DtD for Company P = $\frac{\ln(\frac{100}{70})}{0.10} = 3.56$

DtD for Company Q = $\frac{\ln(\frac{180}{120})}{0.08} = 5.07$

DtD for Company R = $\frac{\ln(\frac{200}{100})}{0.06} = 11.55$

DtD for Company S = $\frac{\ln(\frac{250}{170})}{0.12} = 3.21$

As such, R is the least likely to default, followed by Q, P, and S, in that order.