Credit_Rating_Materials

Credit_Rating_Materials - Rating Committee Client (Issuer...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CRA end association Rating Committee Client (Issuer of debt Instrument) Concurrence Disagreement Rating Published CRA starts from 2 again 1 2 3 4 5 6 7 8 9 Credit Rating Is essentially a symbolic indicator of the current opinion regarding the relative ability and willingness of the issuer of a debt instrument, to meet the debt service obligations. It talks only about the default or credit risk Credit rating is not a general purpose evaluation of an institutional entity nor an overall assessment of the credit risk associated with all the debts and financial instruments issued by the institute. Credit rating is specific to a particular debt/financial instrument The information collected during credit investigation by a rating agency fall typically into four broad categories which are popularly called the ‘four Cs’. They are : Character Capacity Capital Condition 1)Character : Intention to pay, integrity, honesty. Typically would involve collection of information regarding the following : Does the issuer have a good credit record Has the issuer declared bankruptcy in the past 2)Capacity : Capacity of the business to pay, out of operating cash flows? ( current financial standing) 3) Capital : The issuers financial reserves generated out of past performance. Involve analyses of the balance sheet items and components like Working Capital, Net Worth and Cash Flow. 4) Conditions (of the the industry in which issuer is operating):
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/30/2011 for the course ECON 101 taught by Professor Ke during the Spring '11 term at Lethbridge College.

Page1 / 4

Credit_Rating_Materials - Rating Committee Client (Issuer...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online