Perpustakaan Digital ITB

This research is tried to find the best model of variables that determine company's rating. Two methods of Credit Rating Assessment use in this research are Internal Risk Rating and KMV Approach. The variable of Internal Risk Rating is Financial Key Ratios and the variable of KMV Approach is Distance to Default. Financial Key Ratios is the variable to measure Initial Obligor Rating as the floor and basic step to determine company’s rating. Financial Key Ratios has eight variables as the following Times Interest Earned, Cash Interest Coverage, Funds from Operation/Total Debt, Free Operating Cash Flow/Total Debt, Pretax Return on Capital, Gross Profit/Sales, Long-Term Debt/Capitalization, and Total Debt/Capitalization. All of Financial Key Ratios has the function to determine the company's healthiness related to its debt condition. Distance to Default is the variable of KMV Approach that represents the market valuation on the company's creditworthiness and determining Probability of Default in its company. The tendency of Distance to Default is the smaller value of Distance to Default, the higher its company's rating.