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Credit Analysis – In layman terms, Credit analysis is more about identification of risks in situations where a potential for lending is
observed by the Banks. Both quantitative and qualitative assessment forms a part of overall appraisal of the clients
(company/individual). This in general, helps to determine the entity’s debt servicing capacity, or its ability to repay.
In this article, we look at Credit Analysis from Beginner’s point of view –
What is Credit Analysis?
Credit Analysis Process
What does a Credit Analyst looks for?
The 5 C’s of Credit Analysis
Credit Analysis Case Study
Credit Analyst – Obtaining Quantitative Data of the Clients
Credit Analysis – Judgement
Credit Analysis Ratios
Credit Rating
Lesson Learned from Credit Analysis Case Study
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WHAT IS CREDIT ANALYSIS?
Credit Analysis Definition –
Credit analysis is a process of drawing conclusions from available data (both quantitative and qualitative) regarding the credit –
worthiness of an entity, and making recommendations regarding the perceived needs, and risks.
Credit Analysis is also concerned with the identification, evaluation and mitigation of risks associated with an entity failing to meet
financial commitments.
CREDIT ANALYSIS PROCESS
Below diagram shows the overall Credit Analysis Process. (SEE SUMMER)
The five components that make up a credit analysis help the lender understand the owner and the business and determine credit
worthiness. By knowing each of the “5 Cs,” you will have a better understanding of what is needed and how to prepare for the loan
application process.
What you should know about credit analysis?
What is credit analysis?
Credit analysis is simply the evaluated creditworthiness of a business or organization. Simply put credit analysis determines
whether or not a company can fulfill all of its financial obligations. Credit analysis is used in a variety of financial
transactions, including banks that lend to small businesses or companies that issue bonds. Credit analysts investigate
both the borrower and the lender and determine a risk rating. The rating is based upon metrics designed to determine the
probability of default by the borrower and the estimation of loss the lender will suffer if a default should occur.