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Sunday, August 7, 2011

Credit Rating and its Implications

Credit rating gives the future prospects about the credit worthiness of the borrower in respect of the specific financial obligation.
Credit rating tells creditors about the risk attached with the debt financial instruments which they intend to buy. Better the rank lesser is the risk.Credit ratings are issued by credit rating agencies, major rating agencies are- Standard & Poor’s, Fitch, Moody’s are few prominent rating agencies.

Credit Rating
Opinion
AAA
Extremely  Strong capacity to meet the financial commitments(Highest rating)
AA
Very Strong capacity to meet the financial commitments
A
Strong capacity to meet financial commitments but subject to adverse economic conditions
BBB
Adequate capacity to meet financial commitments but subject to adverse economic conditions
BB
Currently OK but less vulnerable to adverse business, financial and economic condition
B
Currently OK but more vulnerable to adverse business, financial and economic condition
CCC
Currently Vulnerable and dependent on business, financial and economic conditions
CC
Currently Highly Vulnerable
C
Currently Highly Vulnerable and under other defined circumstances
D
Payment Default on financial Commitments


Note: + and - sign are used to show relative standing within the major category

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