Long quiz Flashcards
(31 cards)
through investigation and appraisal helps you make informed financial decisions
Informed Decisions
strengthen your negotiating position
Negotiating Power
uncover potential errors or inaccuracies
Identifying errors
minimize the risk of defaults
Reduced risk
providing valuable data
Informed Lending Decisions
efficiently allocate their resources
Efficient Resource Allocation
essential tools for promoting responsible financial practices
Credit Invedtigation and Appraisal
how likely you are to repay loan
Creditworthiness
track record of making payments
Credit history
numerical representation, ranging from 300 to 850
Credit score
ratio compares your monthly debt payments
Debt-to-income ratio (DTI)
lenders want to see that you have a stable source of income
Employment history
Improve your creditworthiness by:
- Make sure to pay all your bills on time
- Keep your credit card balances low
- Don’t apply to much credit at once
- Get a credit builder loan
process of assessing creditworthiness of a borrower
Credit analysis
Assessing the likelihood of a borrower repaying the loan
Purpose
Lenders, investors and other financial institutions
Who performs it
Individuals, businesses governments, borrowers, and other entities seeking loans or issuing debt
Subjects of analysis
Key points of credit analysis
- Purpose
- Who performs it
- Subjects to analysis
Deep dive into; income statement, balance sheet, and cash flow
Fundamental Analysis
Beyond the numbers; talks about the character of a borrower
Qualitative Analysis
Two main types of credit analysis
- Fundamental Analysis
- Qualitative Analysis
Outcome of the credit analysis
Credit rating
Can make informed decisions about lending and investing
Manage risk
The price of debt instrument
Price loans and debt
