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Finance
Rating Agency
A firm that assesses the creditworthiness of companies, governments, or financial instruments. Rating agencies provide independent evaluations of risk, helping investors make informed decisions about lending, investing, or purchasing bonds.
Rating agencies analyze financial statements, market conditions, and economic factors to assign credit ratings. These ratings inform investors about potential risks and influence borrowing costs for issuers. A high rating usually means low risk and lower interest costs, while a low rating signals higher risk and borrowing costs.
While independent, rating agencies must maintain credibility and transparency to provide reliable assessments that guide market behavior.