At the latest since the financial crisis in Greece, it has been known how states are rated by agencies with regard to their creditworthiness. This is also referred to as a rating. However, it is not only states that are affected, but also companies, especially large corporations. The highest rating for the credit rating is Triple A, i.e. AAA. This is an important parameter for banks, for the financial market in general and for investors. But what does AAA mean?
That means an AAA loan.
If a state or company is rated AAA, it has the highest credit rating. The default of a loan is indicated by the agencies responsible for the valuation with a probability of almost 0 percent. Therefore, a rating of AAA also refers to a gilt-edged investment, precisely because there is virtually no risk of credit default. Of course, the question arises as to why such assessments are made at all. The answer to this is very simple, especially in the case of states or large companies with many subsidiaries and structures, the creditworthiness cannot be determined quickly. Nor do annual and budgetary accounts necessarily reflect the actual financial situation as a whole. Often these are only excerpts for a limited period of time. A rating such as AAA not only requires a thorough review, but also a long-term forecast. All points such as the company’s position, order situation, profits, debt-equity ratio, currency risks and much more are taken into account. However, the valuations are not only used for companies and states, but can also be used for organizations, individuals or certain financial products such as securities. Whereby one must emphasize at this point, for the evaluation there is a multiplicity at agencies. Not infrequently This also leads to different classifications, although the deviations are often only minor.
AAA credit you can also lose
As already mentioned, an AAA loan is the highest you can get. Who is classified as AAA, enjoys thereby large advantages. These are especially noticeable when you want a loan from a bank. Due to the very good rating, you not only have a large selection of banks, but you also get a AAA loan with a very favorable interest rate. Financing such as an AAA loan, which in turn has a positive effect on the debt-equity ratio of a company or a state, becomes correspondingly favourable here. Of course, due to wrong expenditures and mistakes in corporate governance or wrong decisions by a state, the valuation of an AAA loan can also be lost. So you also have to do something for the permanent maintenance of an AAA rating. Graduation can have significant financial consequences. Each gradation is not only associated with higher interest rates, but it is also more difficult to borrow money at all on the financial market. Of course, this also increases the level of debt. The worst rating you can get from an agency is D. And a rating with three DDDs documents the inability to pay and the insolvency. Whereby one gets often already with the evaluation of BB at the financial market no more credit and thus the way to D and three times DD is pre-drawn.