The rating methodology involves an analysis of the industry risk, the issuer's business and financial risks. A rating is assigned after assessing all the factors that could affect the creditworthiness of the entity. Typically, the industry risk assessment sets the stage for analysing more specific company risk factors and establishing the priority of these factors in the overall evaluation, For instance, if the industry is highly competitive, careful assessment of the issuer's market position is stressed. If the company has large capital requirements. the examination of cash flow adequacy assumes importance. The ratings are based on the current information provided by the issuer or facts obtained from reliable sources. Both qualitative and quantitative criteria are employed in evaluating and monitoring the ratings.
The main elements of the rating methodology for manufacturing companies are outlined below.