Efficiency Ratios

Cash Turnover: Measures how effective a company is utilizing its cash. Formula: Net Sales Cash Sales to Working Capital (Net Working Capital Turnover): Indicates the turnover in working capital per year. A low ratio indicates inefficiency, while a high level implies that the company’s working capital is working too hard. Formula: Net Sales Average Working […]

Letters of Credit

A letter of credit is essentially a financial contract between a bank, a bank’s customer and a beneficiary. Generally issued by an importer’s bank, the letter of credit guarantees an exporter will be paid once the conditions of the letter of credit have been met. Use: Letters of credit are used to minimize risk in […]

Credit Appraisal of Term Loans by Financial Institutions

The primary objective of credit appraisal is to ensure that the money is given in right hands and the capital and interest income of the bank is relatively secured. It denotes evaluating the proposal of the loan to find out repayment capacity of the borrower. The process involves an appraisal of market, management, technical, and financial. […]

What Credit Officers Look For Before Appraising A Loan

Lenders assess a person’s credit risk based on a number of factors, including your credit and/or payment history, income and overall financial situation. Here is some additional information to help explain these factors, also known as the “5 C’s”, to help you better understand what lenders look for when appraising such a loan:   Character: […]