How Credit Rating Agencies Judge Chemical Companies: Debt, EBITDA, and Ratios for Capital-Intensive, Risk-Heavy Businesses Credit rating agencies assess chemical businesses using a comprehensive set of financial, operational, and industry-specific ratios reflecting the sector's cyclicality, raw-material dependence, environmental risks, and capital intensity. Core focus is on leverage and capital structure ratios, particularly Total Debt/EBITDA, to evaluate long-term solvency and the entity's capacity to service and sustain debt. These ratios help distinguish chemical companies from other sectors by capturing their higher capital requirements, sensitivity to input costs, and exposure to regulatory and environmental compliance risks, thereby enabling a more accurate assessment of overall creditworthiness. (AI Summary)
Below is a comprehensive list of the core financial, operational, and industry-specific ratios that credit rating agencies (CRISIL, ICRA, Moody’s, S&P, Fitch, etc.) typically use to assess the overall creditworthiness of a chemical business. Chemical companies are evaluated differently because of their cyclicality, raw-material dependence, environmental exposure, and capital intensity.
1. Leverage & Capital Structure Ratios
Used to evaluate long-term solvency and ability to handle debt—critical in the capital-intensive chemical sector.
Key Ratios
- Total Debt / EBITDA
- Measures leverage; chemical companies generally need
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