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December 2017 (published: 20.12.2017)
Number 4(31)
Home > Issue > The analysis of the relationship between the synthetic credit rating
and the company's sustainability
Laskina L.Y., Musalimov Viktor M., Silakova L.V.
The study is aimed at identifying the relationship between the synthetic credit rating and the sustainability of the enterprise as a dynamic system. The analysis and evaluation of the synthetic credit rating, based on the interest coverage ratio (ICR), is conducted. The paper examines the financial statements of 7 Russian issuers from two industries - metallurgical and oil for the period 2006-2014. The article analyzes and establishes new universal indicators of the degree of vulnerability of companies assessing sustainability and allowing them to improve their synthetic credit rating. Using the MATLAB software package, the dependency curves of the indicators were constructed, which are the determinants of the interest coverage ratio, such as operating profit (EBIT) and interest on loans and borrowings (In). Based on the correlation analysis, three scenarios for the behavior of EBIT with respect to In were determined, which determine the average ICR values: 1) a monotonically increasing straight line; 2) a monotonically decreasing line; 3) ring variability. It is concluded that there is a relationship between the stability of the company and the agreed-upon change in time of EBIT (ω2) and In (ω1). From this point of view, the variability of the ICR indicator over time can serve as an indicator of the forecasting of the synthetic credit rating. As a result of the research, the maximum rating is forecasted by PJSC "Lukoil", which from the point of view of dynamic systems reflects the implementation of a stable limit cycle. Positive averaged ICRs were obtained for Rosneft, Novatek, Severstal, and NLMK, which also indicates a high credit rating. Finally, for TMK, MMC Norilsk Nickel there are projected a low credit rating.
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Keywords: credit rating, synthetic credit rating, financial sustainability, dynamic system, correlation analysis.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
UDC 338.001.36, 336.051
The analysis of the relationship between the synthetic credit rating
and the company's sustainability
The study is aimed at identifying the relationship between the synthetic credit rating and the sustainability of the enterprise as a dynamic system. The analysis and evaluation of the synthetic credit rating, based on the interest coverage ratio (ICR), is conducted. The paper examines the financial statements of 7 Russian issuers from two industries - metallurgical and oil for the period 2006-2014. The article analyzes and establishes new universal indicators of the degree of vulnerability of companies assessing sustainability and allowing them to improve their synthetic credit rating. Using the MATLAB software package, the dependency curves of the indicators were constructed, which are the determinants of the interest coverage ratio, such as operating profit (EBIT) and interest on loans and borrowings (In). Based on the correlation analysis, three scenarios for the behavior of EBIT with respect to In were determined, which determine the average ICR values: 1) a monotonically increasing straight line; 2) a monotonically decreasing line; 3) ring variability. It is concluded that there is a relationship between the stability of the company and the agreed-upon change in time of EBIT (ω2) and In (ω1). From this point of view, the variability of the ICR indicator over time can serve as an indicator of the forecasting of the synthetic credit rating. As a result of the research, the maximum rating is forecasted by PJSC "Lukoil", which from the point of view of dynamic systems reflects the implementation of a stable limit cycle. Positive averaged ICRs were obtained for Rosneft, Novatek, Severstal, and NLMK, which also indicates a high credit rating. Finally, for TMK, MMC Norilsk Nickel there are projected a low credit rating.
Read the full article
Keywords: credit rating, synthetic credit rating, financial sustainability, dynamic system, correlation analysis.
DOI 10.17586/2310-1172-2017-10-4-24-32