Found 1120 Articles for Banking & Finance

What is Credit Analysis?Credit analysis is an important aspect of business organizations and lenders who offer loans or goods and services on credit. Credit analysis reveals the nature of the customers and shows the potential customer who would be either good or bad in repaying the credited amount. The findings of credit analysis are indicated via a credit report.A credit analysis report is a very important tool for lenders to grant credit to prospective borrowers. By the contents included in the report, the lenders can offer loans to the best potential borrowers.A borrower who has a good repayment record is ... Read More

Collection ProcedureCollections of credit are a very important part of the credit management process as it is the final part of the initiative. By collecting the dues, a lender completes the cycle of credit management. Since collecting the dues is the sole reason for granting credit, firms must know how to proceed with the collection process from individual customers or firms.It is, therefore, obvious that lenders or credit-grantor companies must have a well-structured plan for the collection of dues.Steps Involved in Effective Collection ProcedureFollowing are the steps for the lenders to collect the dues from the borrowers −Issuing a reminderLenders ... Read More

Credit ScoreThe lenders usually depend on a credit score to check how good or bad an individual is in repaying the debt. This score is known as a credit score. A credit score is a key to getting a new loan approved or rejected. When the credit score is above a certain mark, the lenders realize that the capacity of the borrower is enough to pay back a loan.Therefore, a good credit score helps an individual to get loans on favorable terms while a bad score makes it tough to get a new loan approved.Factors Affecting Credit ScoresThe following 5 ... Read More

What is a Marginal Account?Marginal accounts allow investors to borrow money by putting securities they buy as collateral which can be used to buy more securities or for other purposes.The investor’s status of securities can also be viewed by a broker in the case of a marginal account. These accounts are often used by options investors who need to show collateral while shorting the options.With a marginal account, if the investor buys securities that cost more than the balance in the account, the broker automatically pays for the extra amount. Therefore, marginal accounts have an option for credit which is ... Read More

Credit AnalysisCredit analysis is an important part of businesses that provide credit to their customers in order to expand their business portfolio. However, like all other protocols of business, credit analysis is also based on some important factors.To get rid of losses created by bad debt and lengthy payments, businesses can depend on these factors to understand and apply credit analysis to their potential customers.5 C’s of Credit AnalysisThere are select parameters on which the credit analysis process rests. These are known as the 5 C’s of credit analysis. These are the following −CharacterLenders want to judge the financial character ... Read More

What is Credit Analysis?Every business that offers credit to its customers faces a risk of losing money in terms of bad debts. Moreover, many organizations that are granted credit may delay in making payments which may hurt the firm that offers credit to such customers. It is therefore necessary for businesses to analyze the creditworthiness of customers before the credit is granted to them.This process of analyzing the creditworthiness of customers is known as credit analysis. It should be noted that credit analysis is one of the many processes to judge the creditworthiness of customers. There are other tools to ... Read More

What is Accounts Receivable?Although many professionals do not know, accounts receivable is a part of working capital, and it is shown in the balance sheet in the current assets. As this is an investment, AR should be counted as a net realizable value. We get the net realizable value when the AR is adjusted for all costs and deductions from the gross AR itself. These deductions may include, but are not limited to sales discounts, uncollectible balances, allowances, and sales returns.Accounts receivable is an outcome of operations, but many entrepreneurs lose money due to a lack of knowledge of the ... Read More

Features of Optimum Credit PolicyThe optimum credit policy of an organization represents the best credit efforts to maximize the returns from the use of the policy as a marketing tool. Usually, it depends upon the organization as to how much control over the credit policy must be exerted.A too-tight credit policy will lead to loss of opportunities while a too lenient credit policy may lead to an extension of bad debts. Therefore, an optimum credit policy is required by companies to excel in business operations.The main features of an optimum credit policy are as mentioned below −Credit policy variablesEvaluation of ... Read More

Businesses provide credit to their customer for various reasons. In fact, credit can be used as a marketing tool by companies. In order to do so, a company must look at the maximization of profits via incremental sales. However, it is easier said than done.This is so because, in order to use credit as a marketing tool, the companies have to bear the following three types of costs −Production and Sales CostsProduction and selling costs increase with the incremental sales a firm tends to seek.If sales increase within the already existing production capacity, then only variable production and selling costs ... Read More

What are Credit Policy Variables?Credit policy variables are an essential feature of every credit policy. These variables impact the credit policy directly or indirectly. Since the variables have the power to make or break a credit policy they are considered indispensable while forming and executing the credit policy. Management of credit policies requires efficient handling of credit policy variables.The four types of credit policy variables are as follows −Credit StandardsStandards of Credit Policy refer to the offering of credit to particular customers and it is purely institutional in character. A company may decide to grant credit to a company willingly ... Read More