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Question: Explain the five C's of credit rating.

Answer: 1. Character:- Character refers to the temperament of the customer. It is to be judged whether the customer is honest and is prompt in paying the dues that he had undertaken to pay.
2. Capacity:- Capacity refers to the ability of the customer to pay back the purchase price. This can be measured by conducting a detailed investigation of his dealings, his past actions, his possessions, his business methods etc.
3. Capital:- Capital refers to the financial soundness of the customers. This can be assessed by studying the financial statements of the firm.
4. Collateral:- Collateral is a term used to express the additional ability of the customers. This measures the securities held by the customers which can be offered for the credit he avails.
5. Condition:- Condition refers to the economic conditions which influence the activities of the firm. If the conditions are unfavourable the situation will not be good for extending credit to such firms.



Category Working Capital Management Interview Questions & Answers - Exam Mode / Learning Mode
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Question: Explain the five C's of credit rating.
Answer:

1. Character:- Character refers to the temperament of the customer. It is to be judged whether the customer is honest and is prompt in paying the dues that he had undertaken to pay.
2. Capacity:- Capacity refers to the ability of the customer to pay back the purchase price. This can be measured by conducting a detailed investigation of his dealings, his past actions, his possessions, his business methods etc.
3. Capital:- Capital refers to the financial soundness of the customers. This can be assessed by studying the financial statements of the firm.
4. Collateral:- Collateral is a term used to express the additional ability of the customers. This measures the securities held by the customers which can be offered for the credit he avails.
5. Condition:- Condition refers to the economic conditions which influence the activities of the firm. If the conditions are unfavourable the situation will not be good for extending credit to such firms. Source: CoolInterview.com



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