How does S&P evaluate companies for its ratings?

S&P evaluates companies for its ratings through a comprehensive and systematic process that involves analyzing various financial and non-financial factors. The primary focus is on the company’s creditworthiness, which refers to its ability to meet its financial obligations. S&P's methodology typically includes assessing a company's financial statements, such as its balance sheet, income statement, and cash flow statement. These documents provide critical insights into a company's revenue-generating capacity, profitability, and liquidity. In addition to quantitative analysis, S&P places significant importance on qualitative factors. This includes evaluating the company’s industry position, management quality, business strategy, and overall operating environment. S&P also considers external factors such as economic conditions, regulatory landscape, and market dynamics that could impact the company's performance. The analysis is framed within S&P's established rating scales, which categorize companies into different rating levels based on their credit risk. The ratings range from AAA, indicating the highest level of creditworthiness, to D, signifying in default. These evaluations are not one-time events; they are conducted periodically, reflecting any changes in a company's circumstances or the broader economic environment. S&P ensures transparency by publicly publishing their criteria and rationale behind the ratings. For more specific information on their evaluation criteria and process, interested parties may explore S&P's official website, where they provide detailed documentation on their methodologies and ratings criteria.