Professional Documents
Culture Documents
Capacity
Capacity is the subjective judgment of a customer’s ability to pay. Capacity is a measure of the
ability of the credit customer to generate cash sufficient to service the debt. Therefore, evaluation
of this factor is based primarily on the cash income received by the borrower (business or
individual).
It is gauged in part by the customer’s past record and business methods, and, for a firm, it might
be supplemented by physical observation of the firm’s plants or stores. Again, credit analysts
will obtain judgmental information on this factor from a variety of sources.