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Basics of Credit Rating

Jyoti Bothra (BRS Analyst) (55 Points)

11 January 2011

Hi Friends,

Below is the article on " Introduction of Credit Rating "

Happy Reading !!!

Credit rating is the ranking provided on the basis of financial analysis of an individual or of a business concern from there financial history by the credit agencies. This rating shows the ability to meet debt obligations of the business entity. Investors can use this information to decide whether to invest or not.

Credit rating is the instrument which help an investor to differentiate between different debt instruments. It is easy to understand as it is expressed in alphabetical or numerical form.Credit rating not only applies for debt obligation but also for other purposes. There are various kinds of credit rating :Read more

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Raghav Toshniwal (student) (450 Points)
Replied 16 January 2011

I wanna add here that....

Credit Rating Means An assessment of the creditworthiness of individuals and corporations. It is based on the history of borrowing and repayment as well as the availability of assets and the extent of liabilities.

Credit is important because individuals and corporations with poor credit will have difficulty finding financing and most likely will have to pay more because of the risk of default. Credit ratings are a tool used by lenders to determine the types of loans and rate of interest that can be extended to a potential borrower.

Rating is assigned to a company after an evaluation of a host of factors like industry risk factors, market position of the company, its operating efficiently, the legal soundness of the prospectus, the company’s accounting quality, its earning protection adequacy of cash flow, its financial flexibility, its management quality, its capital adequacy, its asset quality, liquidity management profitability and financial position, interest and tax sensitivity, and many other pertinent details. The evaluation is made by a team of highly professional people.

REGARDS

RAGHAV

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