tips to get maximum rating

8/4/2019 Tips to Get Maximum Rating

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TIPS TO GET MAXIMUM RATING

1. Full understanding of companys requirements(1) global or Intra country issuer:

(2) Short term Debt domestic or foreign

(3) Long Term Debt - domestic & foreign

2. Understanding the nature of companys Business and Informational Requirements ofrating Agencies

(1) Statistical or Quantitative Aspects(2) Qualitative Aspects

3. Pay attention on the following aspects

(1) Pay serious attention on adequate communication(2) Communication at credible level

(3) Understanding the rating process

(4) Rating process

(5) Get ready for adequate explanation to justify the growth of the company(6) Quick and maximum disclosure of and transparency

4. Criteria for disclosure5. Do an assignment exercise yourself

(1) Cash flow adequacy

(2) Liquidity

(3) Assets quality(4) Profitability

(4.1) Return on Equity

(4.2) Return on assets

(4.3) Return on fixed assets or personnel(4.4) Return on capital

(4.5) Selling, general and administrator costs as a percentage of sales

(4.6) Net interest margin(5) Leverage and gearing ratio

6. Keep ready to face the reality

(1) Short coming of quantitative analysis(2) Interpretation of the data

(3) Probing the fundamentals and changes thereto affecting credit quality

(4) Take caution against weakness of the companies(5) Get ready to answer on the bitter events

(6) Avoid shadow of default risk

(7) Collect all evidence as proof of credit strength and continuously future cash

Flows

BENEFITS OF CREDIT RATING

For different class of persons different benefits accrue from use of rated instruments.

Such benefits particularly accruing to investors, the rated company and the financialintermediaries or broker are noted below.

(1) Benefits to investors


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Investors are benefited in many ways if the corporate security in which they

intend to invest their savings has been rated by credit rating agency. For

example, they supplement their information, findings and assessment oninvestment proposal and make comparison between the competing securities to

make a choice out of the available options. Some of the benefits directly accruing

to investors through rated instruments are preciously narrated below:(1) Recognition of risk

(2) Creditability of issuer

(3) Easy understanding of the investment proposal(4) Saving of resources i.e. energy and time

(5) Independence of investment decision

(6) Choice of investment

(7) Good bye to thumb rules

BENEFITS OF RATING TO THE COMPANY

A company which had its credit instruments or security rated by a credit rating agencyestablishes its creditworthiness and financial standing. It uses these qualities for biddingon projects, negotiating terms for cheaper credit with financial institution and banks, and

favorable terms with suppliers and contractors of works and finding favorable response

from the investors. In other words, such company is benefited in many ways as givenbelow:

(1) Lower costs of borrowing

(2) Wider audience for borrowing

(3) Rating as marketing tools(4) Self discipline by companies

(5) Reduction in cost in public issues

(6) Motivation for growth(7) Unknown issuer

BENEFITS TO BROKER AND FINANCIAL INTERMEDIARIES

Highly credit rated instruments put the brokers at an advantage to make less efforts instudying the companys credit position to convince their clients to select a particular

investment proposal. Rated instruments speak themselves about the soundness of the

company and the strength of the instrument rated by the credit rating agencies. Thisenables brokers and other financial inter- me diaries to save their time, costs, energy and

manpower is convincing their clients about investments in any particular investment.

ADVANTAGES IN GENERAL FROM CEDIT RATING

(1) Grading debt instruments

(2) Identification of strength and weakness

(3) Liquidity and marketability of debt securities

(4) Impact of capital market


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the a nalysis in two different rating.


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tips to get maximum rating

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