Our Free Sample Essay About Credit Ratings

Credit ratings are useful for non-financial firms since it provides entrance to public debt markets.  It widens a firm’s investor base and enhances debt-pricing. Credit rating enables a firm to enter foreign capital and bond markets and provides an opportunity to get global visibility, therefore, decreasing dependence on domestic banking institutions. Possessing a credit rating can help a company when financial crises occur since the firm will be able to access debt markets despite the conditions that loan supply is low which will enable the firm to pay back loans, issue bonds, and perhaps gain new loans (Judge & Korzhenitskaya, 2013). Possessing credit rating help firms to save cost that would have been accrued in the guarantee fee in banks as they can now borrow from the public. In addition, it also helps the firms to free the possible collateral pledged in guarantee to the bank. Further, credit rating enables the best pricing for firms and helps its ability to time evaluation and dealing with issues.

Possessing a credit rating facilitates firms’ ability to access investors in the business and know how to price the investors’ debt securities. Credit rating enables a firm to source for greater amounts of capital from the investor since the investor will have high regards in the firm’s credit quality. Credit ratings enable firms to list their debts in capital markets and escape the turnover tax. Possessing a credit rating enhances a firm’s image and standing such that dealing with potential foreign customers and partners will be easy. Undertaking a credit rating gives enables firms to get comprehensive reviews from third parties to check the firm’s product market offering, a sufficiency of systems and controls as well as the risks that the firm might be vulnerable to. The management of the firm will then gain reasonable value addition as they will be accorded useful ideas, stratagems, and advancement advice which will then be used to avoid weaknesses (Schroeder, 2015). In addition, the rating process recognizes the major downsides risk propellers which will enable the firms to adopt apt stratagems to improve their shareholder value.