A Loan Officer Is Examining Your Income and the Amount

question 124

Multiple Choice

A loan officer is examining your income and the amount of your existing debt payments and monthly expenses in deciding whether to make a loan to you today.Which aspect of the 5 Cs of lending is the loan officer most likely looking at?

• A)Character
• B)Capacity
• C)Capital
• D)Collateral
• E)Conditions

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Definitions:

Debt Ratio

A financial ratio that compares the amount of a company’s total debt to its total assets, indicating the leverage level.

Assets

Resources owned by a company or individual considered valuable and can be used to produce positive economic value.

Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership interest of shareholders.

Note Payable

An obligation in the form of a promissory note, which requires the borrower to pay back the loan or debt to the lender at a future date.