what does it mean when a financial rating firm (Moody's and Fitch) raised the rating of a company and what's

Question

the benefit to that company

Answer 1

Financial ratings are what people look at when selecting a company. They want a company with a good reputation that is financially secure. The higher the rating the better for the company because this will increase the amount of consumers wanting their product.

For instance, when selecting an insurance company, you would want to make sure that it is one that is going to be around for a while and financially sound, able to pay claims. If you selected one with a low rating, they may go bankrupt when you need them the most. Insurance has guards to protect consumers against this placed by federal law but to collect is a hassle, lots of time and red tape.

Answer 2

It means that the rating company believes something about the target company changed for the better (earnings, competition situation, CEO, etc.), and therefore the company should be rated higher than it was previously. Typically, ratings are something like:
sell, hold, accumulate, strong buy.

The benefit to the company, provided the rating is higher, is that it calls attention to positive improvement, and therefore investors may choose to invest in the stock. Also, other rating companies may raise their ratings as well. This causes the stock price to rise, sometimes dramatically.