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Chapter 3: Q8DQ (page 219)

What are the 5 Cs of credit that are sometimes used by bankers and others to determine whether a potential loan will be repaid?

Short Answer

Expert verified

The five C’s of credit are character, capital, capacity, conditions, and collateral.

Step by step solution

01

Meaning of credit 

Credit is the money that an entity has borrowed from another entity. The credit can be given by the banks and financial institutions or by one business associate to another associate.


02

The five c’s of credit 

The five C’s of credit are:

  1. Character is the credit history of the borrower.
  2. Capital is the savings done by the borrower.
  3. Capacity is the ability of the borrower to repay its loan.
  4. Conditions refer to the terms of the credit and other information that helps in deciding if the credit should be given to the borrower.

Collateral refers to the security given by the borrower to the lender

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Most popular questions from this chapter

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of \(8 per order, and carrying costs of \)1.60 per unit.

a. What is the economic ordering quantity?

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