Rating scale, Financial Management

Rating denote an issuer's ability to respond to adverse changes in circumstances and economic conditions. The rating scale is generally differentiated into various levels of credit viz., high investment grade, investment grade and speculative grade. The scale and corresponding definitions are as follows:

High Investment Grades

AAA Highest Safety

Debentures rated 'AAA' are judged to offer highest safety of timely payment of interest and principal. Though the circumstances providing this degree of safety are likely to change, such changes, as can be envisaged, are most unlikely to affect adversely the fundamentally strong position of such issues.

AA High Safety

Debentures rated 'AA' are judged to offer high safety of timely payment of interest and principal. They differ in safety from 'AAA' issues only marginally.

Investment Grades

A Adequate Safety

Debentures rated 'A' are judged to offer adequate safety of timely payment of interest and principal; however, changes in circumstances can adversely affect such issues more than those in the higher rated categories.

BBB Moderate Safety

Debentures rated 'BBB' are judged to offer moderate safety of timely payment of interest and principal for the present; however, changing circumstances are more likely to lead to a weakened capacity to pay interest and to repay principal.

Speculative Grades

BB Inadequate Safety

Debentures rated 'BB' are judged to carry inadequate safety of timely payment of interest and principal; while they are less susceptible to default than other speculative grade debentures in the immediate future, the uncertainties that the issuer faces could lead to inadequate capacity to make timely interest and principal payments.

B High Risk

Debentures rated 'B' are judged to have greater susceptibility to default; while currently interest and principal payments are met, adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.

C Substantial Risk

Debentures rated 'C' are judged to have factors present that make them vulnerable to default; timely payment of interest and principal is possible only if favorable circumstances continue.

D In Default

Debentures rated 'D' are in default and in arrears of interest or principal payments or are expected to default on maturity. Such debentures are extremely speculative and returns from these debentures may be realized only on reorganization or liquidation.

Posted Date: 9/11/2012 1:21:15 AM | Location : United States







Related Discussions:- Rating scale, Assignment Help, Ask Question on Rating scale, Get Answer, Expert's Help, Rating scale Discussions

Write discussion on Rating scale
Your posts are moderated
Related Questions
Fundamentals of Structured Product Engineering 1. (a) Let r m denote the m month swap rate (or Libor rate). Subsequently the 3 × n month forward rate f (3 ×n )

In two of the four months of the cash budget Thorne Co has a cash shortage with the highest cash deficit being the opening balance of $40000. This cash shortage which has occurred

what are the assumptions of MM(Modigliani Miller) approach

Explain the Types of Debt Securities There are many types of debt securities available in market.  The range includes Government Securities, Deep discount bonds, Deben

#quA stock has a current dividend of $0.32 with a growth rate of 8% annually. Assuming a 10% annual discount rate, what should the price of the stock be one year from today? Answer

Explain what will happen while the government imposes a minimum price that is below the market equilibrium price. Why is this true? The minimum price will comprise no impact on t

Church Inc. is currently enjoying relatively high growth because of a surge in the demand for its latest product.  Management expects earnings and dividends to grow at a rate of 25

how control the steps

discuss the applicability of the operational cycle in vegetable growing business in uganda

a) An approx. 3% defect rate (i.e. 0.03 x 300m units) = 9m units per year. b) A apparent definition of Quality Assurance should be awarded, e.g. the management process of guaran