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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
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
A credit selection method
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