What is the meaning of Credit Rating?


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Credit Rating

 

 

Credit Rating-

  • Credit rating is an expression through the use of alpha- numeric symbols of the opinion about credit quality of the issuer of securities with reference to a particular instrument.
  • Credit rating is a simple and costly to understand.
  • Such rating, which is expressed in symbols, is subject to an upward or downward change as the situation changes.
  • Benefits of credit rating-
  • To investors-
  1. Quick investment decisions
  2. Safeguard against bankruptcy
  3. Risk reorganization etc
  • To issuer company-
  1. Lower cost of borrowing
  2. lower cost of issue
  3. better brand image
  4. growth
  • Criticism-

Do not downgrade companies promptly

Errors of judgment in assigning high rating to product etc.

 


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