stock market

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larissa johanson
larissa johanson's picture
stock market

Hi guys,

I'm a rookie in the stock market investments so I have a couple of questions about some terms that I came across :

What is the credit quality? What is the rating?

Thank you.


Jason Pride
Jason Pride's picture

Hi Larissa,

Credit quality is similar to your personal credit score. It is a measure of the risk of default that the firm poses. There are several firms that provide ratings. Most use a letter grading system where A (or AAA) is the best and D is the worst. Firms are raked based on both their previous history as well as a review of their financial statements. Auditors attempt to identify any anomalies in financial statements that would indicate that the firm may be financially unstable.