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Unformatted text preview: ds, (2) credit terms, and (3) credit monitoring. Credit Selection and Standards
The firm’s minimum requirements
for extending credit to a
customer. Credit selection involves application of techniques for determining which customers should receive credit. This process involves evaluating the customer’s
creditworthiness and comparing it to the firm’s credit standards, its minimum
requirements for extending credit to a customer. Five C’s of Credit
five C’s of credit
The five key dimensions—
character, capacity, capital,
collateral, and conditions—used
by credit analysts to provide a
framework for in-depth credit
analysis. One popular credit selection technique is the five C’s of credit, which provides a
framework for in-depth credit analysis. Because of the time and expense
involved, this credit selection method is used for large-dollar credit requests. The
five C’s are
1. Character: The applicant’s record of meeting past obligations.
2. Capacity: The applicant’s ability...
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