Presumably, the credit rating agency has superior evaluation skills to those available in the company and will minimise the potential for bias or error by providing an objective and consistent assessment across all evaluated firms. Also the agency may be better equipped to evaluate the state of the company since it will have a database and use experts. Show an alternative treatment for the presentation of the Abercrombie Services plc's balance sheet. The credit assessment agency could have shown a netted-down balance sheet as commonly used in the United Kingdom for financial reporting. The agency needs a range of measures to evaluate the firm because there are different dimensions to the firm's credit risk.
Different ratios address specific aspect's of the firm's activities.
In essence, the rating process is trying to determine the dynamics or the strengths and weaknesses of the firm by looking at its management, its capital structure, the ability to operate the business in a variety of economic conditions, and the degree of financial risk, and so on, taken by the company. You may wish to refer to the financial data given by the agency on Abercrombie Services plc where appropriate. It examines the firm using a range of variables for the different dimensions of its performance and risk, including qualitative factors such as the strength of the management, its competitive position and so forth. These may involve industry comparisons and trends in the variables over time. The next stage involves allocating a point or category score to these individual dimensions of the firm's credit risk.