What are the characteristics of companies that tend to get high Credit Grades

Modified on Thu, 02 Mar 2023 at 06:04 PM

  • Regular income streams compared to project-based or ‘lumpy’ cashflows

  • Relatively high negotiating power within the supply chain i.e., able to set its own credit policy or demand for cash payment upfront 

  • Consistently demonstrates revenue growth 

  • Has a diversified customer base rather than concentrated on a few customers

Therefore companies may report negative profit in their financial statements, but have a high Credit Grade.

Just like seeing a doctor or performing a health screening, credit assessment only provides a snapshot of the financial health of the company at that point in time. In which case the financial health of the company may change in the following situations

  • Change of customer preferences

  • Change of competitor landscape

  • Change of regulatory environment

  • Change of logistics and ability to fulfill orders

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