What is the Credit Utilization Ratio? The credit utilization ratio, also known as the balance-to-limit ratio, compares the amount of credit used versus the total available credit. The ratio outlines how well an individual is managing their credit and is used by consumer credit reporting agencies such as TransUnion and Equifax as part of their…
What is a Business Plan? A business plan is a summary document that outlines how and why a new business is being created. New entrepreneurial ventures must prepare formal written documents to outline their long-term objectives and the means to be employed to reach said objectives. The business plan underlines the strategies that need to…
What are Credit Analyst Tasks? Credit analyst tasks primarily involve deciding whether individuals and businesses applying for credit (either for personal use or business use) are given credit. Credit analysts help banks and financial institutions allocate credit and manage risk effectively. The specific tasks and responsibilities of a credit analyst depend largely on his level of…
What is Credit Score Analysis? Credit score analysis is the process through which different companies evaluate an individual’s or a company’s credit score to help determine how creditworthy the entity is. A credit score is significant because it takes into account how many times credit was used and how efficiently it was repaid. How Credit…
How to Assess Effective Management? Management is an integral part of any organization. How well an organization is managed under specific circumstances can make or break it. Hence, effective and efficient management is the sole reason for any organization’s success. It is imperative for an organization to strive for effective management. Effective management practices are…
What is Creditworthiness? Creditworthiness, simply put, is how “worthy” or deserving one is of credit. If a lender is confident that the borrower will honor her debt obligation in a timely fashion, the borrower is deemed creditworthy. If a borrower were to evaluate their creditworthiness on her own, it would result in a conflict of…
What are the 5 Cs of Credit? The 5 Cs of Credit is a framework used by financial institutions and other non-bank lenders to evaluate the creditworthiness of a borrower, as well as the strength of an overall borrowing request. The 5 Cs are: The 5 Cs of credit impact pricing, structure, and the general…
What is the Accrual Principle? The accrual principle is an accounting concept that requires transactions to be recorded in the time period in which they occur, regardless of when the actual cash flows for the transaction are received. The idea behind the accrual principle is that financial events are properly recognized by matching revenues against…
What is GAAP? GAAP, or Generally Accepted Accounting Principles, is a commonly recognized set of rules and procedures designed to govern corporate accounting and financial reporting in the United States (US). The US GAAP is a comprehensive set of accounting practices that were developed jointly by the Financial Accounting Standards Board (FASB) and the Governmental Accounting…
