One of the most important things in finance is business credit ratings. These are grades that indicate how “good” a company is at paying their debts. They can be used to decide how safe it is for investors to invest in certain companies, and they’re also useful for predicting future fiscal performance. All of these credit ratings are compiled by S&P Capital IQ, one of the leading international credit rating agencies.
S&P Capital IQ is a global credit rating agency comprising three divisions: S&P Global Ratings, S&P Capital IQ and S&P Emerging Markets. S&P Global Ratings publishes credit ratings and analysis on over 100 countries. The company also provides investment advice and manages the investment portfolios of corporate clients around the world. S&P Capital IQ divides its coverage between sovereign debt and corporate debt. This provides investors with access to the full range of credit risk—short-term and longer-term interest rates, as well as local currency and foreign exchange rates—in markets for both sovereign and corporate bonds, loans, commercial paper and equities throughout the world.
S&P Capital IQ provides investors with credit ratings, analysis and reports on global equity markets, global sovereigns and governments, as well as the US economy. The company has the mission that it seeks to provide investors with all relevant assessments of credit, market sentiment and economic factors that could affect securities prices. The company holds its data internally in S&P Capital IQ Research electronic databases. They’re able to extract the data from these databases to produce research reports. These are then published on their website, along with any comments or observations made by the analysts at S&P Capital IQ about them. The materials are updated throughout the day to reflect what’s happening in financial markets around the world.
S&P Capital IQ publishes its ratings on all types of bonds, notes, covered bonds, commercial paper and other debt issues. They’re divided into the following categories: sovereign, corporate, institutional and general. S&P Capital IQ also publishes credit ratings on entire countries. They do this by assessing their credit rating using the same methodology as used to assess individual companies. The rating is based on how effectively a government can manage its budget deficit, as well as how it manages its level of national debt. It also measures the stability of the central bank and the financial system. The company also looks at how effective a country’s tax system is at collecting revenue to fund government spending.
Steps for Rating a Business
S&P Capital IQ uses the same methodology for rating Corporate debt as they use to rate Sovereign debt. This includes calculating a country’s liquidity and leverage ratios, comparing it to comparable firms and assessing the firm’s debt-management strategies. The company also looks at a firm’s business prospects, as well as its future growth prospects. All of these factors are factored into the rating.
A rating is downgraded if it believes the firm will not be able to meet its debt obligations. This could be due to an unsustainable debt level, or because of unfavourable business conditions. The scale is based on the amount of debt that a company is taking on. Also taken into account are the interest rate the firm has to pay on its debts, as well as whether it carries a high international risk premium on its bonds.
If a firm has a negative outlook, it means that the agency is considering downgrading the firm’s credit rating if business conditions worsen. If a firm has a positive outlook, it means that the agency is considering upgrading the firm’s credit rating if business conditions improve.
S&P Rating is one of the most influential and widely recognized securities and credit ratings in the world today. The rating agency does not have a financial stake in the companies it rates, and therefore ratings are impartial and objective. S&P Rating is a subsidiary of The McGraw Hill Companies, Inc., a leading business media company.
S&P Corporation was founded by John A. McRae on December 10, 1860, as the “Standard and Poor’s Railroad Guide”. It is headquartered in New York City. The company’s ratings are used for a wide variety of products including bonds issued by the governments of European Union member states and non-EU countries such as Switzerland and Norway, as well as corporate bonds issued globally by companies from retail to industrial sectors.
S&P also provides ratings on credit-related indices for global unsecured bonds, investment-grade corporate bonds, senior securities, junk bonds and asset-backed commercial paper. The company’s rating methodology sets the standard in most financial markets. Its method of estimating the likelihood of default is known around the world by name: S&P Credit Rating System. S&P’s ratings are published daily for most countries around the world in Standard & Poor’s reports, including: “Country Ratings” (issued weekly), “Bond Ratings” (issued daily), “Bank Ratings” (issued daily) and “Companies” (published on a monthly basis).
While the rating of companies is at the discretion of rating agencies like S&P, they in turn base their decisions on certain date gleaned from the operations of firms and the overall business environment. While the external business environment may not be in the direct control of business managers, the internal environment is firmly within their control and therefore, they can reasonably influence the outcome of ratings by credit agencies. Fintalent, the hiring and Collaborative platform for Tier-1 Strategy and M&A professionals offers business owners and managers First class professional freelancers that can help businesses bolster their Credit Rating through stronger internal controls, disciplined financial management and deft business moves. Our Consultants know exactly what Credit agencies look out for in firms drawing from years of cumulative experience gathered from working with some of these agencies. With experts hired from Fintalent, firms are sure to put their businesses on a sound footing thereby enjoying favorable credit ratings.
