Asset Quality Rating

AAA

DEFINITION of 'Asset Quality Rating'

A review or evaluation assessing the credit risk associated with a particular asset. These assets usually require interest payments - such as a loans and investment portfolios. How effective management is in controlling and monitoring credit risk can also have an affect on the what kind of credit rating is given.

INVESTOPEDIA EXPLAINS 'Asset Quality Rating'

Many factors are considered when rating asset quality. For example, consideration must be put into whether or not a portfolio is appropriately diversified, what regulations or rules have been put in to place to limit credit risks and how efficiently operations are being utilized. Typically, a rating of one shows that asset quality is good and there is very little credit risk, while a rating of five can signify that there are major asset quality problems and issues that need to be managed.

RELATED TERMS
  1. Six Sigma

    A quality-control program developed in 1986 by Motorola. Initially, ...
  2. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. CAMELS Rating System

    An international bank-rating system where bank supervisory authorities ...
  5. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  6. Market Risk

    The possibility for an investor to experience losses due to factors ...
RELATED FAQS
  1. I have discovered that a bond I am interested in has a sinking fund. What does this ...

    First, understand that a sinking fund provision is really just a pool of money set aside by a corporation to help repay a ... Read Full Answer >>
  2. How is my credit score calculated?

    The credit score, commonly referred to as a FICO score, is a proprietary tool created by the Fair Isaac Corporation. This ... Read Full Answer >>
Related Articles
  1. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  2. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  3. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  4. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  5. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  6. Professionals

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  7. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...
  8. Professionals

    What's Human Capital?

    Human capital is a company asset, but it’s not listed on the balance sheet. Human capital is all of the creative skills and knowledge embodied in the employees of a company -- skills that bring ...
  9. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  10. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center