Credit Analysis Topic 2

What Is Credit Rating?

• Mechanism used by an independent third party to makes an assessment, based on different sources of information on the likelihood of a default in the debt payment of a corporate issuer.

• Mechanism used by an independent third party to makes a monitoring, based on different sources of information on the likelihood of a default in the debt payment of a corporate issuer.

Functions of Credit Rating

• Investor Protection

• Enlarged Investor Pool

• Information Disclosure

• Efficient Capital Market

Popular Rating Agency

• Moody

• Finch

• Standard and Poor

•Reason for capital adequacy management

•Prevents bank failure

• ensure that these institutions do not take on excess leverage and become insolvent

•used to protect depositors and promote stability and efficiency of financial systems around the world

•Amount of capital effect returns for the owners (equity holders of banks)

•Minimum amount of bank capital( bank capital requirement required by regulatory authorities)

• TRUE

• FALSE

The first who proposed a Z-score measuring a company's financial strength using a weighted sum of several factors among the variables (financial ratios) that gives an approximate description of the bankruptcy probability.

• Morten

• Altman

• KMV

Individual rating in Malaysia

(you can choose more than 1 answer)

• CCRIS

• CTOS

• RAMCI

• RAM