Moody's Investors Service — methodology overview

Moody's uses a scorecard-led framework for corporate ratings. Each sector has a dedicated scorecard that maps financial and qualitative inputs to a preliminary rating outcome. The scorecard output is then reviewed by a rating committee that applies judgment to arrive at a final rating, which may deviate from the scorecard result when qualitative factors or forward-looking considerations are material.

Approach in brief

The Moody's corporate framework starts with sector selection. Because the rating criteria differ meaningfully across industries, the first step is identifying the applicable sector methodology — for example, a telecommunications company would be assessed under the telecoms scorecard, with its own factor definitions and weighting scheme. Sector methodologies cover a wide range of industries including utilities, industrial companies, consumer goods, financial institutions, and specialised sectors such as healthcare and project finance.

Within a sector scorecard, analytical factors are grouped into categories — typically combining a business or industry profile dimension with a financial profile dimension. Each factor is assigned a weight, and each factor has its own scoring grid that maps specific metrics or qualitative assessments to a rating outcome in Moody's notation (Aaa, Aa, A, Baa, Ba, B, Caa). The weighted average of the factor scores produces a scorecard-indicated outcome.

The scorecard output is an input to the rating committee, not the final answer. Moody's committees apply additional considerations that the scorecard may not fully capture: the quality and depth of management, liquidity adequacy, financial policy, event risk (including M&A), shareholder return policies, and environmental or governance factors. Where an issuer benefits from the support of a parent or a government, a notching adjustment is applied to reflect that uplift — or constraint — relative to the stand-alone assessment.

For financial institutions and certain other sectors, Moody's uses a Baseline Credit Assessment (BCA) in lieu of the corporate scorecard; the BCA captures the intrinsic creditworthiness before any potential support from a parent or government. Instrument-level ratings may be notched above or below the issuer rating depending on seniority and security.

Key analytical anchors Moody's emphasises

• Sector-specific scorecard — the primary analytical tool; factor weights differ meaningfully by industry
• Business profile factors — scale, market position, product diversification, geographic footprint
• Financial profile factors — leverage, coverage, profitability, and cash flow adequacy measured against sector-calibrated benchmarks
• Liquidity — assessed separately via Moody's Liquidity Risk Assessment or SGL ratings for speculative-grade issuers
• Financial policy — leverage targets, dividend and buyback appetite, and M&A history
• Group and government support — uplift or constraint relative to the stand-alone assessment where applicable
• Committee judgment — the final rating may deviate from the scorecard output when the committee identifies material considerations the scorecard does not capture

Where to read the source

Moody's publishes its sector methodologies and cross-sector methodologies on its public website. Sector documents include the applicable scorecard, factor definitions, metric calibrations, and worked examples. Cross-sector methodologies cover topics including hybrid securities, liquidity, government-related entities, and financial statement adjustments.

NotchWork references these materials as analytical inputs. The shadow ratings NotchWork produces are indicative assessments only and do not represent the view of Moody's Investors Service.