Credit analysis

Similar financial terms

Creditors, short
This is all current liabilities payable on demand or within one year of the Balance Sheet date. For Banks this also includes short term bank liabilities such as deposits.

Creditors, long
This is all liabilities payable more than one year after the Balance Sheet date. This includes provisions and deferred taxation, loans and debt, including convertible debt, repayable more than one year after the Balance Sheet date.

Deferred credits
Deferred income listed in the liability section of the balance sheet.

Trade credit
Credit granted by a firm to another firm for the purchase of goods or services.

Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his needs. Normally the line involves a firm commitment from the bank for a period of several years.

Revolving credit agreement
A legal commitment wherein a bank promises to lend a customer up to a specified maximum amount during a specified period.

Retail credit
Credit granted by a firm to consumers for the purchase of goods or services.

Line of credit
An informal arrangement between a bank and a customer establishing a maximum loan balance that the bank will permit the borrower to maintain.

Letter of credit (L/C)
A form of guarantee of payment issued by a bank used to guarantee the payment of interest and repayment of principal on bond issues.

Best-interests-of-creditors test
The requirement that a claim holder voting against a plan of reorganization must receive at least as much as he would have if the debtor were liquidated.

Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target.

Consumer credit
Credit granted by a firm to consumers for the purchase of goods or services. Also called retail credit.

Credit enhancement
Purchase of the financial guarantee of a large insurance company to raise funds.

Credit period
The length of time for which the customer is granted credit.

Credit risk
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the payment may not be made on a negotiable instrument.

Credit scoring
A statistical technique wherein several financial characteristics are combined to form a single score to represent a customer's creditworthiness.

Crediting rate
The interest rate offered on an investment type insurance policy.

Creditor
Lender of money.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

SWOT analysis
A SWOT analysis assesses the strenghts, weaknesses, opportunities and threats of a certain entity. Thus far, it is a common approach to formulating firm strategy via assessments of firm capabilities in relation to the market

Fundamental analysis
A method of research that studies basic financial information to forecast profits, supply and demand, industry strength, management ability, and other intrinsic matters affecting a stock's market value and growth potential.

Vertical analysis
The process of dividing each expense item in the income statement of a given year by net sales to identify expense items that rise faster or slower than a change in sales.

Technical analysis
Security analysis that seeks to detect and interpret patterns in past security prices.

Sensitivity analysis
Analysis of the effect on a project's profitability due to changes in sales, cost, and so on.

Scenario analysis
The use of horizon analysis to project bond total returns under different reinvestment rates and future market yields.

Regression analysis
A statistical technique that can be used to estimate relationships between variables.

Pro forma capital structure analysis
A method of analyzing the impact of alternative capital structure choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will be able to use projected tax shield benefits fully.

Performance attribution analysis
The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (a) What were the major sources of added value? (b) Was short-term factor timing statistically significant? (c) Was market timing statistically significant? And (d), Was security selection statistically significant?

Multiple-discriminant analysis (MDA)
Statistical technique for distinguishing between two groups on the basis of their observed characteristics.

Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.

BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in Berkeley, California. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.

Break-even analysis
An analysis of the level of sales at which a project would make zero profit.

Cluster analysis
A statistical technique that identifies clusters of stocks whose returns are highly correlated within each cluster and relatively uncorrelated between clusters. Cluster analysis has identified groupings such as growth, cyclical, stable and energy stocks.

Common-base-year analysis
The representing of accounting information over multiple years as percentages of amounts in an initial year.

Common-size analysis
The representing of balance sheet items as percentages of assets and of income statement items as percentages of sales.

Design Failure Mode and Effects Analysis (DFMEA)
An analytical technique used by a design responsible engineer/team as a means to assure, to the extent possible, that potential failure modes and, their associated causes/mechanisms have been considered and addressed.