Credit analysis is actually a type of evaluation which calculate the creditworthiness of a organization by the connection portfolio manager. The evaluation seeks to spot the appropriate level of default risk when a lender provides a lending to the organization or specific (Credit Analysis, n. m. ). In accordance to Weerasooriya, the three basic principles that lead to financing decision are safety of loan, suitability of loan purpose and profitability. The first concepts is the safety of bank loan which identifies how safe is the mortgage if the financial institutions approve the money. A safe debtor is the one who has good characteristic, economically sound and to enhance and willingness to repay the money. In order to improve the safety of loan, banks require a assets from the debtor as it is a safety device against unanticipated circumstances. The other principles is definitely the suitability of loan purpose. A valid goal is the one that can be legal and conforms for the lending coverage of financial institutions. The third is the profitability. The banks ought to compare the fee and the go back of a loan before allowing it as interest upon loan is a major sources of income for the banks. (Sathye, M. & Bartle, L. & Vincent, M. & Boffey, R., 2002) To follow all the rules, financial institutions go through a credit rating analysis for all loan functions. The traditional technique of credit analysis is the five Cs which in turn proposed by simply De Lucia and Peters are figure, capacity, capital, collateral and conditions. These types of five Cs will help financial institutions in judging the safety, suitability of bank loan and earnings.
Credit rating Analysis. (n. d. ). Retrieved coming from investopedia. com: http://www.investopedia.com/terms/c/creditanalysis.asp#axzz2LB1NVV71 Sathye, M. & Bartle, L. & Vincent, M. & Boffey, R. (2002). Credit rating Analysis & Lending Management. John Wiley & Music Austalian Ltd.