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

question 63

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.

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Definitions:

Bad Debts Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect.

Uncollectible Accounts

Refers to receivables that are deemed unlikely to be collected, indicating potential losses for a company.

Allowance for Doubtful Accounts

An accounting provision made by a company to account for accounts receivable that might not be collected.

Bad Debts Expense

Financial accounting charge for accounts receivable that a company does not expect to collect.