Fixed income
Creditworthiness
Creditworthiness is the overall evaluation of a borrower’s ability to repay debt. It reflects their financial stability, credit history, and existing obligations and indicates the likelihood that an individual, company, or government will meet its debt payments on time. Companies with higher creditworthiness are seen as low-risk and can access loans or issue bonds at more favorable interest rates, while lower creditworthiness results in higher borrowing costs due to increased risk.
Creditworthiness factors
Creditworthiness is assessed by credit rating agencies, which assign ratings based on various factors, such as:
Credit history: A track record of timely repayment and debt management.
Financial stability: Indicators like cash flow, income levels, and asset quality.
Debt levels: The proportion of current debt relative to income or assets.
Strong creditworthiness is essential for securing financing at competitive rates and maintaining financial flexibility, while weak creditworthiness can limit funding options and raise the cost of borrowing for a company.