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C Analysis of Financial Statements
What is the primary purpose of analyzing financial statements in credit management?
Financial statement analysis helps a banker assess the creditworthiness, repayment capacity, and financial health of a borrower before sanctioning credit facilities.
What is the formula for calculating the Current Ratio?
Current Assets divided by Current Liabilities.
Which financial statements are typically obtained from a borrower for credit appraisal?
Bankers obtain the Balance Sheet, Profit & Loss Account, and Cash Flow Statement, usually for the last three years, along with projected financials for new projects.
What is the ideal Current Ratio benchmark generally accepted by bankers?
2:1 is the ideal current ratio for lending.
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