An applicant's capacity to repay its requested credit can be found through
A) financial statement analysis.
B) bank account balances.
C) the applicant's payment history.
D) the level of assets the applicant can pledge toward the loan.

Question

Quizplus · Accepted Answer

Financial statement analysis, which includes reviewing an applicant's income statement, balance sheet, and cash flow statement, can reveal the applicant's ability to generate enough cash flow to support loan payments. This analysis can also identify factors that may impact the applicant's ability to repay the loan, such as significant debt or a negative trend in financial performance. Bank account balances and payment history can provide additional information but may not give a comprehensive view of an applicant's financial capacity. The level of assets that can be pledged towards a loan can provide collateral to back up a loan in case of default but does not necessarily indicate the applicant's ability to make loan payments.

An Applicant's Capacity to Repay Its Requested Credit Can Be