in credit analysis, capacity is best described as the:
A) quality of management.
B) ability of the borrower to make its debt payments on time.
C) quality and value of the assets supporting an issuer's indebtedness.

Question

Quizplus · Accepted Answer

Capacity refers to the borrower's ability to make timely debt payments. This is often assessed by analyzing the borrower's cash flows, income, and financial ratios. It reflects the borrower's financial strength and stability. Quality of management and quality and value of assets are important factors in credit analysis, but they are not synonymous with capacity.

In Credit Analysis, Capacity Is Best Described as The