The Entity's Creditworthiness Evaluation

In the modern world, hedging the loan risk is actually extremely important. Under the conditions of market financial instability, it is significant to scan the financial condition of domestic companies and evaluate their creditworthiness. Such analyses are essential for the effectiveness of crediting activity in general. The higher category of creditworthiness shows the financial stability of the company-borrower, while the lower one requires the additional scan of the borrower or can be the reason to refuse. The purpose of the work is analysis and comparison of the methodologies of creditworthiness evaluation implemented by Sberbank and Altman in order to find out the effectiveness of Sberbank scoring model. Methodologies used in this paper are literature overview, theoretical analysis, comparing of different theories, and hypothesis. The paper consists of three chapters, introduction, conclusion, references, and appendixes. The first chapter is dedicated to theoretical background of loan and creditworthiness evaluation methodologies, especially the scoring model and Altman’s Z-score model. The second chapter describes in details the methodology implemented by Sberbank to creditworthiness evaluation. The last chapter is the practical one. The 29 companies from three different industries: construction, transport, and pharmaceuticals were analyzed with Sberbank scoring model and the Altman’s Z-score model. The results of the research demonstrate that the categories of creditworthiness got by two models are different due to the fact that Sberbank scoring model examines the profitability of investments and qualitative indicators in addition to others indicators that influence the companies’ categories of creditworthiness.