Everything involved in the rating process is relative to other rating factors, such as market position, business profile, financial and balance sheet ratios, management practices, and local economic factors, according to a report published June 3 by Standard & Poor’s (S&P) Ratings Services.
The report, U.S. Not-for-Profit Health Care Sector: Core Ratios and Their Role in the Rating Process, describes the key ratios that nearly always affect S&P rating decisions. These core ratios are an essential aspect of S&P’s assessment of relative financial strength or weakness, which is further refined by weighing various qualitative and quantitative rating factors.
The report also explains how S&P looks behind the numbers to less concrete rating factors and uses its outlook statements to highlight situations where historically stable situations may be turning negative or positive. Also considered are how an organization’s future debt plans and average age of plant as well as its management and board’s philosophy regarding liquidity, debt, and asset allocation factor into S&P ratings and outlooks.
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