Systematic Process Credit Rating In Germany â€Myassignmenthelp.Com

Question: Discuss About The Systematic Process Credit Rating In Germany? Answer: Introducation With the ramified economic changes and complex business functioning, banks and financial institutions before granting loans, needs to implement credit analysis of company. This analysis helps in evaluating the credit worthiness and companys capacity to honor its financial obligations in determined approach. In this report, Grammar AG Company has been taken to evaluate the credit worthiness. It is observed that it is joint stock Company having is headquarter in Amberg, Germany which has been running its business since 1990. Business model of Grammar AG Company This company is specialized in developing and manufacturing components and system for car interiors and passengers seat. This business model of company is related to installing cyber computing enterprises resource planning and entering into integrated strategic planning. This level of business model has allowed company to establish proper value chain activities to deliver goods and services to clients. It is considered that entering into strategic alliance with other organizations assist in delivering proper level of business services to clients. Company has created core competency in developing and delivering system for car interiors and passengers seat (Presbitero, Udell Zazzaro, 2014). Industry highlighted Automotive industry has been showing high amount of growth in Germany. It is evaluated that many new entrants who are coming up with their marketing strategies to sell auto parts and other components of car are selling their products at very high cost. Grammar AG Company has created brand image in Germany and shown high amount of growth in Germany. Therefore, it could be inferred that if Grammar AG Company could expand its business by injecting more capital then it will increase its market share and overall growth in determined approach (Allen, et al. 2014). Strength and weakness of credit analysis of company. After evaluating the annual report and market conditions of Germany Automotive industry, it could be inferred that Grammar AG Company has high credit worthiness. In addition to this, it has observed that company has various strategic alliances and invested more than EUR 500 million in its business capital. Company has vision to expand its business with a view to increase overall clients satisfaction (Bluhm, Overbeck Wagner, 2016). Grammar AG Company has been facing high amount of challenges such as sluggish market conditions, loss of business structure, high penalties and traits. The main weakness of company is related to creation of charge on its assets. Company already had EUR 9.5 million loans only as promissory loan. Total amount of loan raised by company in the market is around EUR 110 million (Trampusch, 2014) Simple model Company has vision to expand its business to increase its overall market share. Cyber computing ERP system will help Grammar AG to have proper communication channel and effective business functioning (Bedendo Colla, 2015). Financial projections Company has total revenue of EUR 1.42billion and shown more than 5% increase in its total revenue as compared to last five year data. Company has paid consideration of EUR 300 million with a view to enter into strategic alliance with other partner. Debt to equity ratio of company is also Particular 2014 2015 2016 DEBT 606 739 781 Equity 231 253 270 After evaluating the debt to equity of company, it could be inferred that company has taken loan and debt which is already very high as compared to its equity capital. In addition to this, it has increased its debt portion by 20% since last three years. This level of increment in debt has shown that company has increased its overall financial leverage and debt portion throughout the time. With the help of financial projection, it could be considered how much revenue and Expenses Company would have in future through the time. It could be based on its past years earning. Particular 2014 2015 2016 2017 2018 2019 Revenue 1366 1426 1695 1795 1870 2097 This trend analysis has shown that company has increasing its earning throughout the time and it will increase its sustainability and credit worthiness throughout the time. Particular 2014 2015 2016 Financial leverage 3.62 3.93 3.89 This financial leverage has shown that company maintained stable financial risk. However, company has effective credit worthiness throughout the time. References Allen, L., Brand, A., Scott, J., Altman, M., Hlava, M. (2014). Credit where credit is due.Nature,508(7496), 312-313. Bedendo, M., Colla, P. (2015). Sovereign and corporate credit risk: Evidence from the Eurozone.Journal of Corporate Finance,33, 34-52. Bluhm, C., Overbeck, L., Wagner, C. (2016).Introduction to credit risk modeling. Crc Press. Presbitero, A. F., Udell, G. F., Zazzaro, A. (2014). The home bias and the credit crunch: A regional perspective.Journal of Money, Credit and Banking,46(s1), 53-85. Trampusch, C. (2014). Why preferences and institutions change: A systematic process analysis of credit rating in Germany.European Journal of Political Research,53(2), Management. Turner, A. (2017).Between debt and the devil: Money, credit, and fixing global finance. Princeton University Press.