Professional Documents
Culture Documents
Capital
This provides a caution for any loss that may occur and helps to keep the bank from ending up in bankruptcy and court haggling over the
remains of a dead company. Special emphasis is given to the risk ratios such as the debt/asset ratio, the current ratio, and the times-
interest-earned ratio.
Collateral
The borrower might offer assets as security in order to obtain credit represent collateral. “The
lender will make sure that collateral does not drive the lending decisions.” Especially, for large
loans or long-term loans the lender may require some type of collateral.
If the borrower fails to live up to the terms of the credit agreement the collateral can be sold to
satisfy the debt. As per experts opinion, collateral is the last resort for any credit officer.