CCM Credit Scoring & Rating Systems 2

Question 1

What is Standard & Poor's lowest investment-grade credit rating?

Accepted Answer

BBB-

Answer

BBB- is S&P's lowest investment-grade rating; any rating of BB+ or below is considered speculative grade (junk).

Question 2

What does a 'CreditWatch' or 'review for possible downgrade' designation from a rating agency indicate?

Accepted Answer

The agency is actively monitoring the issuer for a potential near-term rating change

Answer

A CreditWatch designation signals that the agency is closely monitoring the issuer and a rating action may be forthcoming, typically within 90 days.

Question 3

The NACM (National Association of Credit Management) Credit Risk Score is based primarily on:

Accepted Answer

Trade payment experiences reported by member companies

Answer

NACM's credit scoring draws on actual trade payment experience data contributed by its member companies, reflecting how businesses pay their trade creditors.

Question 4

What is a 'split rating' in credit analysis?

Accepted Answer

When a company's domestic credit rating differs from its foreign currency rating

Answer

A split rating occurs when two prominent agencies (e.g., S&P and Moody's) assign different ratings to the same issuer or debt issue, requiring analysts to reconcile the disagreement.

Question 5

Moody's rating that is roughly equivalent to Standard & Poor's 'BBB' is:

Accepted Answer

Baa2

Answer

Moody's Baa2 is the approximate equivalent of S&P's BBB, both representing mid-tier investment-grade credit quality.

(CCM) Certified Credit Manager Practice Test

(CCM) Certified Credit Manager Practice Test

CCM Credit Scoring & Rating Systems 2