Question

A personal credit rating can have a significant impact on an individual’s life and future; the same relationship can be applied to a corporation and its bond rating. Students have learned that a bond is rated based on its credit risk. As most U.S. corporations have some kind of debt financing, what actions can a firm take to keep its bond rating as high as possible and thus positively affect the cost of its long-term financing? Do people do similar things to keep their own credit ratings high?

Answer 1

These are the following actions that will be undertaken by a firm in order to maintain a high Bond rating-

A. higher amount of solvency and higher amount of liquidity in the entire organisation.

B. Generation of a higher amount of profits and repayment of of interest on regular intervals by the organisation

C.past performance of the organisation in relation to payment of debt should be highly favourable and attractive.

D.form should be having a higher amount of fixed asset so it can maintain a higher amount of collateral.

E better future projection of maintenance of the cash flows in order to finance the debt in the company.

people can be using various kind of proactive measure in order to maintain a higher credit rating because they can be easily estimating there futuristic cash flows and they can prepare a plan in accordance to use their income and maintain a portion of their savings so that they can be using their credit effectively and they can also take them in order to generate a higher rate of return in long term by investment. This will help them in achieving higher credit rating.