INTRODUCTION TO CREDIT ANALYSIS

1
INTRODUCTION TO CREDIT ANALYSIS

• CHAPTER NO 01

2
Meaning of Credit
3
Credit loss

• When debtors do not pay back
• It occurs usually because of business failure

4
Reasons of credit loss

• Business failures
• Inflation
• Currency devaluation

5
Business failure is due..

• ? in competition
• New technology
• Substitues
• ? in prices
• ? in demand
• Overestimation of demand
• Oversupply position in the market
• Overestimation of demand

6
Continued ..

• Credit loss due to inflation
• Credit loss due to devaluation of currency

7
Role of credit

• Idle economic resource utilization
• Availability of financial resources
• Mobilization and channelization of resources
• Economic growth and wealth maximization
• Increasing purchasing power and living standard

8
Credit market

• Personal credit
• Business credit market
• Government credit market

9
Merits of credit

• Wealth maximization
• Tax planning tool
• Business control
• convenience

10
Demerits

• If ROI ? Borrowing
• Chances of bankruptcy
• Personal credit excessive consumption
• Fixed repayment obligations
• Inflationary pressure

11
Suppliers of credit

• Commercial banks
• Term lending/development institution
• Public debt market
• Other institution in credit financing
• Trade credit