Where have you heard about short-term ratings?

What is a short-term rating?

A type of credit rating given to a company or sovereign state, indicating the likelihood of defaulting on their debt within one year. This type of rating tells investors how likely a borrower is to meet all of its short-term debt obligations.

Traditionally, long-term ratings were used to gauge the stability of a company, highlighting the likelihood of it defaulting at some point in the future. But, following the global economic crisis, you're now more likely to see investors focus on short-term ratings.

What you need to know about short-term ratings.

A company's credit rating can have a significant impact on its ability to borrow money. A poor rating attaches a higher degree of risk to a business, potentially making it less attractive to investors. In comparison, a strong rating is likely to make it more appealing.

A company is usually given a score by one of the three main credit rating agencies - Standard & Poor's, Moody's and Fitch. The credit rating table runs all the way from AAA to D. Any bonds issued by companies with credit ratings lower than BBB - are generally deemed non-investment grade.

Find out more about short-term ratings.

To learn how a company can achieve a strong credit rating, see AAA (credit rating).