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When a Financial Analyst Examines the Credit Risk of a Company,it

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Essay

When a financial analyst examines the credit risk of a company,it is common that he or she uses a set of factors that all begin with the letter "C." Each factor provides a consideration that enters into the lending decision.List and discuss how each of the factors affects a company's credit risk.


Definitions:

Direct Financing Lease

A leasing arrangement in which the lessor purchases an asset for the lessee and rents it out, with the lease payments designed to cover the original cost plus a profit margin.

Unearned Interest: Leases

Interest that has been collected on a lease agreement before it has been earned, usually according to the payment schedule.

Residual Value

The anticipated revenue from selling an asset once it has reached the end of its serviceable life.

Present Value Factors

Multipliers used to calculate the present value of a future amount of money or stream of cash flows, given a specific discount rate.

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