Credit Rating
Credit Rating (CR) as financial service, has come a long way, since John Moody first introduced the concept 1909. In India it started in 1988.
Credit rating is has been used to rate debt instrument viz. Fixed Deposit, Commercial Paper
Credit rating is a technique of credit risk valuation for the corporate debt instruments reflecting borrower’s expected capability and inclination to pay interest and principal in a timely manner. * In evaluation both qualitative and quantitative criteria are applied. * It involves past performance as an assessment of its future prospects and entails judgment of the company’s competitive position, operating efficiency, management evaluation, accounting quality, legal position, earnings, cash flow adequacy, financial flexibility, the quality of the product etc.
CREDIT RATINGS: -
An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities * Rating is a symbolic indicator of the current opinion on the relative capability of timely servicing of the debts and obligations. * Lower rating does not mean lesser funds available rather it suggests higher risk level. * Credit rating essentially establishes a link between risk and return. * A rating is valid for the lifetime of the debt instrument subject to continuous surveillance and depending upon the performance of the issuer, it may be retained, placed under watch, upgraded or downgraded.
NEED FOR CREDIT RATING * It is necessary in view of the growing number of cases of defaults in payment of interest and repayment of principal sum borrowed by way of fixed deposits, issue of debentures or preference shares or commercial papers. * Maintenance of investors’ confidence, since defaults shatter the confidence of investors in corporate instruments. * Protect the interest of investors who can not into merits of the debt
Credit rating is has been used to rate debt instrument viz. Fixed Deposit, Commercial Paper
Credit rating is a technique of credit risk valuation for the corporate debt instruments reflecting borrower’s expected capability and inclination to pay interest and principal in a timely manner. * In evaluation both qualitative and quantitative criteria are applied. * It involves past performance as an assessment of its future prospects and entails judgment of the company’s competitive position, operating efficiency, management evaluation, accounting quality, legal position, earnings, cash flow adequacy, financial flexibility, the quality of the product etc.
CREDIT RATINGS: -
An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities * Rating is a symbolic indicator of the current opinion on the relative capability of timely servicing of the debts and obligations. * Lower rating does not mean lesser funds available rather it suggests higher risk level. * Credit rating essentially establishes a link between risk and return. * A rating is valid for the lifetime of the debt instrument subject to continuous surveillance and depending upon the performance of the issuer, it may be retained, placed under watch, upgraded or downgraded.
NEED FOR CREDIT RATING * It is necessary in view of the growing number of cases of defaults in payment of interest and repayment of principal sum borrowed by way of fixed deposits, issue of debentures or preference shares or commercial papers. * Maintenance of investors’ confidence, since defaults shatter the confidence of investors in corporate instruments. * Protect the interest of investors who can not into merits of the debt