How is Moody's credit rating rated?

Moody's credit rating is divided into nine levels: aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Aaa debt has the highest credit quality and the lowest credit risk. C-grade debt is the lowest bond grade, and the chances of recovering principal and interest are slim. In the six grades from Aa to Caa, you can add the number 1, 2 or 3 to further show the ranking of various debts in the same grade. 1 is the highest and 3 is the lowest. Credit rating refers to the evaluation of the credit status of individuals or enterprises. Individuals or enterprises with poor credit will have greater difficulty in financing than those with good credit, and because of poor credit, they have to pay higher interest to attract lenders to lend.

Basic principles of Moody's credit rating

1. Pay attention to in-depth field research and obtain first-hand information.

In order to collect first-hand information, Moody's credit rating analysts should interview the management of bond issuing enterprises on the spot, including the heads of administration, finance, investment projects, sales, planning and development departments. In addition, analysts should also investigate and interview other departments or enterprises that have creditor-debtor relations with bond issuers, in order to understand the historical credit status of bond issuers, the real pressure of debts and the situation of capital withdrawal.

2. Combining qualitative analysis with quantitative analysis, emphasizing qualitative analysis and industry differences.

Moody's rating index system includes quantitative and qualitative aspects. In addition to quantitative analysis, qualitative analysis is widely used in financial analysis and prediction of some indicators, and the rating results are obtained by combining various factor analysis and expert opinions, so as to fully reflect the risk composition of the assessed object, and pay attention to the mutual comparison of the credit risks of the assessed object in different industries or within the same industry. The rating indicators are different according to the different industries of the assessed object and the economic subject, and the overall consistency is considered.

3. Analyze and evaluate the future solvency and cash flow.

Moody's rating is based on the static analysis of the current solvency of the appraised object, focusing on the future solvency of the appraised object, such as economic cycle, competitive position of the industry, market conditions, quality of managers, mergers that may affect the credit of the appraised object, legal proceedings and other emergencies. In financial analysis, we pay attention to the analysis of cash flow. Moody's credit rating believes that the ability to repay due debts depends largely on the adequacy of corporate cash flow, and analysts should pay special attention to the net cash flow generated by operating activities.