4 collateral the amount of assets the applicant has

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Unformatted text preview: to repay the requested credit, as judged in terms of financial statement analysis focused on cash flows available to repay debt obligations. 3. Capital: The applicant’s debt relative to equity. 4. Collateral: The amount of assets the applicant has available for use in securing the credit. The larger the amount of available assets, the greater the chance that a firm will recover funds if the applicant defaults. Hint Computers are widely used to aid in the credit decision process. Data on each customer’s payment patterns are maintained and can be called forth to evaluate requests for renewed or additional credit. 5. Conditions: Current general and industry-specific economic conditions, and any unique conditions surrounding a specific transaction. Analysis via the five C’s of credit does not yield a specific accept/reject decision, so its use requires an analyst experienced in reviewing and granting credit requests. Application of this framework tends to ensure that the firm’s credit customers will pay, without being pressured, within the stated credit terms. 612 PART 5 Short-Term Financial Decisions Credit Scoring credit scoring A credit selection method commonly used...
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This document was uploaded on 01/19/2014.

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