TaxTMI 
TaxTMI 
Business ratio being used by India Credit Rating Agencies for providing credit ratings.
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....usiness ratio being used by India Credit Rating Agencies for providing credit ratings.<br>By: - YAGAY andSUN<br>Corporate Laws / IBC / SEBI<br>Dated:- 28-5-2025<br>Credit rating agencies in India, such as CRISIL, ICRA, CARE Ratings, and India Ratings & Research, use a combination of quantitative and qualitative factors to assign credit ratings. One of the core aspects of their analysis includes fi....
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....nancial ratios - key indicators of a company's financial health, performance, and creditworthiness. Here are the common financial ratios used by Indian credit rating agencies: 🔹 Liquidity Ratios These assess a company's ability to meet short-term obligations: * Current Ratio = Current Assets / Current Liabilities * Quick Ratio = (Current Assets - Inventory) / Current Liabili....
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....ties * Cash Ratio = Cash & Cash Equivalents / Current Liabilities 🔹 Leverage (Solvency) Ratios Used to evaluate long-term solvency and debt servicing ability: * Debt-to-Equity Ratio = Total Debt / Shareholders' Equity * Interest Coverage Ratio = EBIT / Interest Expense * Debt Service Coverage Ratio (DSCR) = (Net Operating Income) / (Total Debt Service) 🔹 Profitability Ra....
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....tios To assess the efficiency of operations and earning capacity: * Net Profit Margin = Net Profit / Revenue * Return on Capital Employed (ROCE) = EBIT / Capital Employed * Return on Net Worth (RONW) = Net Income / Shareholders' Equity * EBITDA Margin = EBITDA / Revenue 🔹 Operating Efficiency Ratios To evaluate how efficiently a company uses its resources: * Asset Turnover Rat....
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....io = Revenue / Total Assets * Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory * Receivables Turnover Ratio = Revenue / Average Accounts Receivable 🔹 Coverage Ratios To measure how well the company can meet its debt obligations: * Fixed Charges Coverage Ratio = (EBIT + Fixed Charges) / (Fixed Charges + Interest) * Cash Flow Coverage Ratio = Operating Cash Flow / ....
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....Total Debt Service 🔹 Cash Flow Ratios Evaluated especially for infrastructure, manufacturing, or capital-intensive firms: * Operating Cash Flow to Total Debt = CFO / Total Debt * Free Cash Flow = CFO - Capital Expenditure Qualitative Factors Also Considered: * Management quality * Industry risk * Regulatory environment * Business model and competitive position * Corporate ....
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....governance standards * Legal/contractual protections (e.g., escrow mechanisms, DSRA) ***<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....