Advantages of Credit ranking
Different benefits accrue by use of graded instruments to
different course of shareholders or the firm. These are discussed as below:
A. Benefits to Shareholders
1 . Protection of opportunities. Credit rating gives an idea before hand to the shareholders about the degree of financial power of
the issuer company. Based on rating he makes a decision about the
investment. Highly regarded issues gives an assurance for the
investors of safety of Investments and minimizes his risk.
installment payments on your Recognition of risk and returns. Credit ranking symbols
suggest both the earnings expected as well as the risk attached to a particular issue. It becomes easier for the investor to
understand the worth of the issuer company by simply
looking at the symbol since the issue is usually backed by the
financial strength of the business.
3. Freedom of investment decisions. Investors need not seek
advise from your stock brokers, merchant bankers or the
collection managers before making investments. Buyers
today have time and impartial to take expense decisions
themselves. They foundation their decisions on ranking symbols
attached to a particular reliability. Each score symbol designated to a particular investment suggests the creditworthiness of
the investment and indicates the level of risk involved in
some. Wider selection of investments. As it is mandatory to rate
financial debt obligations for each issuer firm, at any particular time, a comprehensive portfolio of credit scored instruments are available for making purchase. Depending upon his own capability to
bear risk, the trader can make choice of the investments in which expense is to be manufactured.
5. Reliable credibility of issuer. A shortage of any link
between the rater and graded firm ensures dependable
reliability of company and appeals to investors. As rating company has no vested interest in concern to be ranked, and has no
business contacts or links with the Plank of Company directors.
In other words, that operates independent of the issuer
business, the ranking given by it usually is accepted by
six. Easy knowledge of investment plans. Investors
require no conditional knowledge on their part regarding the
company company. Depending upon rating icons assigned
by rating companies they can continue with decisions to
help to make investment in just about any particular scored security of your
six. Relief from botheration to know organization. Credit agencies
reduce investors by botheration of knowing the information
of the organization, its record, nature of business, economic
position, fluidity and earnings position, structure
of managing staff and Board of Directors etc . Credit
ranking by specialist and specialized analysts repos
confidence in investors to rely upon the credit icons for
taking investment decisions.
8. Advantages of continuous monitoring. Credit rating
firms not only designate rating icons but also
continuously keep an eye on them. The Rating company downgrades
or upgrades the rating icons following the decrease or
improvement in the budget respectively.
N. Benefits of Ranking to the Business
A company that has got their credit instrument or protection rated is benefited in the following methods.
1 . Easy to raise assets. A company with highly rated
tool finds it easy to raise solutions from the general public. Even though traders in different sections of the culture
understand the level of risk and uncertainty placed on a
particular security nevertheless they still obtain attracted on the highly rated musical instruments.
2 . Lower cost of borrowing. Investors often like to generate
investments in these kinds of instrument, which will ensure security and
easy liquidity instead of high level of returning. A company can reduce the expense of borrowings by quoting lesser interest about
those fixed deposits or debentures or perhaps bonds, that are
three or more. Reduced cost of public problems. A company with highly rated devices has to generate least efforts in raising funds
through public. It can reduce it is...