What is the meaning of credit rating?

Credit rating is a rating in form of a full report which rates a particular business as per the credentials and the soundness of the financial statements like various terms of borrowing and lending etc. Thus it is linked to the financial instrument.

The report represents financial credibility of the business entity as determined by the statements of their assets and liabilities. Latter is usually done to check if the entity meets the debt obligations.  Also, it is helpful in the assessment of the solvency of the particular entity. These ratings rest on the detailed analysis taken up by many credit-rating agencies like Standard & Poor’s, Moody’s etc.

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