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Techniques and Methodologies use for Credit Analysis:


Introduction:
                Every business need loans from different financial markets. That’s the reason the credit agencies  check the Credit or Solvency ratio of the company. Through which they check the credibility of the company to pay back the loan. That the reason we can easily say that Credit Analysis means the ability of a company  to pay its obligations which the company is liable to pay on time. Credit Analysis determines for various financial and non-financial  instruments as well as for the projects which are under process or the company wants to work over them.

Use of Credit Analysis:
The Credit Analysis determines in two different steps, the analyzer make a complete analysis of the of the particular asset on the basis of the correct available information, for this purpose they check the impacts on the other factors, portfolios, sensitivity analysis of the particular asset. Credit Risk in actual a performance measurement of the company how the company manage its risks? and how they act and react to achieve their desire exposure?


Credit Analysis and Financial Market:
 The Capital market and financial market agencies like the banks, lending agencies and the derivatives market agencies always prefer the  solvency ratio which helps them to lend the loan to the company. Every company has the professional staff that helps them internally to check and manage the risk, they have the mathematical models to make the risk situations better for the company, operations and helps them to regulate the capital.

In reality the loan or credit awarding agencies process was very easy but in the past there are many business organization who did frauds with the credit rating agencies and present their financial statements like that which not describing their credit exposure. But now there are many models and matrices which helps the credit rating agencies and derivative market organizations to issue them the loans on the basis of their credit analysis.


Analysis techniques and methodologies:
That’s the reason with the help of  credit analysis techniques and methodologies of particular assets or the multi projects. The Credit rating agencies  perform their role in the analysis of the companies as third party on the basis of their independent role and the companies in the business world give respect to their roles in the market. These Companies workout on the liquidity of the companies and check that how much liquidity they have to perform their day to day immediate operations in their running projects. That’s the reason the liquidity rations , Solvency rations and the working capital ratios are important of the companies. But in the Portfolio the credit analysis need some more mathematical and graphical workout to understand the picture more clear. For that purpose we have some methods which are as follows:

  •         Credit metrics developed by risk metrics.
  •         Credit Risk+ by Credit Suisse Financial Products.
  •          Credit Portfolio view by Mckinsey and Company.

For the Credit measurement if the Credit is issued to the companies with the fixed sum amount and the company exposure is easy to define according to their market condition and with the general business seniors with this criteria the credit analysis is very easy. But if the market risk factor for particular asset or for the company is high so in this condition the risk management in joint case is very difficult.

Conclusion:

In conclusion the credit analysis is the analysis of a company reaction to manage the risk and to manage its liquidity assets and perform well in the business market  with its well management risk skills. If the company performance is well and they have sufficient securities and liquidity to run their operations regarding particular asset or joint assets / projects. At this phase the independent credit rating agencies give them the very effective and efficient rating and the derivative market agencies and the financial capital market like banks feel easy to lend them some capital for their desire projects. 

Credit Analysis is very important for every business in the financial and capital lending market . I search many business relevant papers and book which helps me to write about the some basic and advance material about this topic and about the independent credit agencies role in this mater. I am very thankful to the Ericbenhamous.net website and authors of this document. The URL address of the referenced document which helps me in this topic the link is as follows: https://ericbenhamou.net/documents/Encyclo/credit%20analysis.pdf



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