Write a memorandum for circulation to all the junior members of the credit control

department that highlights FIVE key indicators of customer solvency problems, which can be
identified from published financial statements
Dear All,

This is to inform all of the credit control department the need to ensure the customer solvency as it is
becoming the most important matter that affects the viability of the organisation in the event of
increasing non performing assets. So everyone have to take care about the following points while
performing your duty of credit control.

1) Analyze the cash flow statement and ensure that there is a positive cash flow in every year.

2) Analyze the current ration and ensure minimum current ratio of 2:1

3) Ensure the debt equity ratio is under control

4) Ensure that the Assets in the financial statements are free from fictitious Assets and debit balance
of profit band loss account or the share of these items in the total asset is very less.

5) Analyze the performance of creditors and ensure that every creditor pays within the period and no
accounts stands outstanding for long periods