Question:
Who are responsible for assessing the creditworthiness of companies and financial instruments?
Who are responsible for assessing the creditworthiness of companies and financial instruments?
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Credit Rating Agencies act as independent financial auditors, assigning letter grades (such as AAA, BBB, or C) to reflect the credit risk of debt instruments.
Updated On: Jun 22, 2026
- Underwriters
- Custodians
- Credit rating agencies
- Sub-brokers
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The Correct Option is C
Solution and Explanation
Step 1: Defining Credit Assessment:
Credit assessment involves evaluating a company's financial health to determine its ability to pay interest and repay the principal on its debt instruments (such as bonds or commercial paper).
Step 2: Evaluating the Options:
• Underwriters (A): Guarantee the subscription of public issues during IPOs.
• Custodians (B): Safekeep assets and securities for institutional investors.
• Sub-brokers (D): Help brokers onboard clients and execute trades.
Step 3: Identifying the Rating Entities:
Specialized financial services firms, known as Credit Rating Agencies (C) (such as CRISIL, ICRA, and CARE), analyze corporate balance sheets and financial health to assign credit ratings.
Credit assessment involves evaluating a company's financial health to determine its ability to pay interest and repay the principal on its debt instruments (such as bonds or commercial paper).
Step 2: Evaluating the Options:
• Underwriters (A): Guarantee the subscription of public issues during IPOs.
• Custodians (B): Safekeep assets and securities for institutional investors.
• Sub-brokers (D): Help brokers onboard clients and execute trades.
Step 3: Identifying the Rating Entities:
Specialized financial services firms, known as Credit Rating Agencies (C) (such as CRISIL, ICRA, and CARE), analyze corporate balance sheets and financial health to assign credit ratings.
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