Rating scale, Financial Management

Assignment Help:

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.


Related Discussions:- Rating scale

Explain inventory approach to cash management, Q. Explain Inventory approac...

Q. Explain Inventory approach to cash management? This method analysis cash in the same way as engine inventory such that EOQ models may be employed. In such conditions cash

Operating cycle, applicability of operating cycle in poultry

applicability of operating cycle in poultry

Define market value in modigliani miller equation, Define in the Modigliani...

Define in the Modigliani-Miller equation (MM equation), why is the market value of the levered firm greater as compared to the market value of an equivalent unlevered firm? Th

Determine the expected return, Question : (a) Lucky Corporation is cons...

Question : (a) Lucky Corporation is considering an investment in one of the two mutually exclusive proposals: Project A which involves an initial outlay of Rs 170,000 and Proj

Fiancial management, Ashok is to receive an amount of Rs. 15,00,000 from hi...

Ashok is to receive an amount of Rs. 15,00,000 from his relative after 3 years. He wants to buy a house for which he wants the money to be paid now. His relative had already invest

Cash dividends factors that decided by stockholders, What are some of the f...

What are some of the factors that common stockholders consider when deciding how much, if any, cash dividends they desire from the corporation in which they have invested? Gene

Cost of capital, Dividends are expected to grow at a constant rate of 5 per...

Dividends are expected to grow at a constant rate of 5 percent per year in the future. Firms last dividend was $1 and stock price 10 dollars the firms beta 1,2 the rate of return o

305, I have an assignment due today and needs some help

I have an assignment due today and needs some help

Operating cycle, Discuss the applicability of the operating cycle to poultr...

Discuss the applicability of the operating cycle to poultry business in Uganda(consider broilers)

Exchange rate changes decrease risk of foreign investment, Would exchange r...

Would exchange rate changes all time increase the risk of foreign investment? Discuss the condition within which exchange rate changes may actually decrease the risk of foreign inv

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd