The Bond Credit Rating Explained

When you operate a business, there are a lot of new tax and financial terms that you will have to become acquainted with.  One of these terms is bond credit rating.  What exactly does this mean and what does it do? 

A bond credit rating is essentially a credit rating for various companies.  They are much like personal credit ratings, except that they are used by investors to determine when a company is worth putting money into.  There are different ratings, from AAA to D, and they can be extremely useful for anyone looking to invest.  The bond credit rating lets you know how strong the capacity is for a company to be able to meet their financial obligations.

The highest bond credit rating is Aaa for the Moody’s rating system and AAA for both Fitch and Standard & Poor’s.  This indicates that a company is extremely able to satisfy financial obligations.  On the other end of the spectrum is the C rating for Moody’s and the D rating for Fitch and Standard and Poor’s.  This rating indicates that a company has failed to pay back one or more of its financial obligations. 

When you are looking to invest, understanding the bond credit rating is essential.  You don’t want to sink your money into a corporation that is likely to borrow more than it can afford to pay.  When you pay attention to the bond credit rating, it is much easier to make great investment decisions.

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