MBA (Finance)III – Semester, Merchant Banking and Financial Services, Unit 5.3
Factors influencing Assigned Ratings
The ratings are assigned by the credit rating agency based on the following factors:
Factors
influencing Assigned Ratings
The ratings are assigned by
the credit rating agency based on the following factors:
The issuer’s ability to meet
the obligations of debt.
The volume and composition of
outstanding debt.
The earning capacity of the
company and its stability of ‘future cash flows’.
The interest coverage ratio
i.e. it is the relationship between fixed interest and profit of the company
(EBIT) whose ability to meet its fixed interest obligations.
Current Ratio which is
calculated to assess the liquidity position of the issuing firm.
The value of assets pledged
as collateral security
Market demand for the
products, competitors’ market share, and distribution channels etc.
Operational efficiency is
judged by capacity utilization, prospects of expansion, modernisation and
diversification, availability of raw material etc
Track record of promoters,
directors and expertise of staff.
