Question

In: Finance

In the midst of the Covid-19 crisis in which we find ourselves, which of the 5...

In the midst of the Covid-19 crisis in which we find ourselves, which of the 5 C's of Credit is of increased importance and requires more extensive analysis than in ordinary times?

Solutions

Expert Solution

5 C's fof the credit are character, capacity, capital, collateral, and conditions.

Let me explain this to you from the credit worthiness of an entity's point of view because I am currently working in a role where I am assessing the credit worthiness of the companies.

  • In the crisis of Covid-19, companies have been closed down due to the lockdown and the business are not generating nay revenue. Therefore, it is important that they have enough Capital that can be used for atleast next 6 months by the time situation improves. Therefore, Capital is one of the most important factor right now. Your capital should be enough to service your debt obligations for next few months.
  • Another important C is Collateral- If the sufficient capital is not available, we may rely on collateral and use it for servicing the debt obligation. Therefore, we need to assess the quality of collateral provided against any of the mortgage.
  • Lastly, the amount of money the entity has - Capacity, it will give you a sense of how they will be able to survive further.

I think these 3 Cs are of utmost importance right now. Character is something which can not be assessed in these difficult times and Conditions are as we know almost the same across the world.


Related Solutions

Firm dynamics in the COVID-19 crisis. Analyze the impact of the COVID-19 crisis from a firm...
Firm dynamics in the COVID-19 crisis. Analyze the impact of the COVID-19 crisis from a firm dynamics perspective. Assume that the productivity of all firms is the product of an economy wide parameter z times an idiosyncratic firm-level productivity that varies by firm and over time as an AR(1) process. What does the basic model predict regarding entry, exit, employment, wages? How does the policy of loans converted to grants to keep employment at the firm level affect the equilibrium?
In the midst of COVID-19, it is reported that over 195 million people will lose their...
In the midst of COVID-19, it is reported that over 195 million people will lose their jobs and many small businesses have already closed around the world as a result. Central Banks across the world have been advised to institute policies to help stabilize their economies. Discuss whether central banks should implement expansionary or contractionary monetary policies to achieve stabilization. Discuss arguments for and against each policy direction. Discuss tools that can be used.
In the midst of COVID-19, it is reported that over 195 million people will lose their...
In the midst of COVID-19, it is reported that over 195 million people will lose their jobs and many small businesses have already closed around the world as a result. Central Banks across the world have been advised to institute policies to help stabilize their economies. Discuss whether central banks should implement expansionary or contractionary monetary policies to achieve stabilization Discuss arguments for and against each policy direction. Discuss tools that can be used.
In an essay of 3-5 paragraphs discuss the following: As a result of the Covid-19 crisis,...
In an essay of 3-5 paragraphs discuss the following: As a result of the Covid-19 crisis, there have been periodic shortages of medical supplies, personal protective equipment, manufactured goods and food. Specifically identify one of these shortages and discuss a pricing strategy that you believe would help alleviate the shortage in an equitable and efficient manner. Why would your suggested method of pricng work better than what is currently in use?
4. In the midst of Covid-19 pandemic, firms cut production due to lockdown. How will firms’...
4. In the midst of Covid-19 pandemic, firms cut production due to lockdown. How will firms’ cutting of production affect employment? Explain you answer using an appropriate diagram.                                                                                                        (2) Suppose firms do not want to lay off workers, explain how firms decision may affect employment and wages in the labour market. Explain labour market using an appropriate diagram.     (3)
By mid-May 2020, in the midst of the COVID-19 Pandemic, gas prices fell to its lowest...
By mid-May 2020, in the midst of the COVID-19 Pandemic, gas prices fell to its lowest level since 2016 reaching as low as $1.85 per gallon on average in the U.S.A. Using your knowledge of factors that impact demand and supply, explain the various ways in which gas prices fell during an international pandemic. To get the full 3 point extra credit, your discussion must: Include a statement on which direction Demand Curve and/or the Supply Curve for gas shifted....
Many analysts have tried to compare the Covid 19 Crisis with the economic and financial crisis...
Many analysts have tried to compare the Covid 19 Crisis with the economic and financial crisis in 2007-2008. do you think that the covid 19 crisis is similar or different with the economic and financial crisis, why?
5 pts Currently, record numbers of Canadians are becoming unemployed due to the ongoing COVID-19 crisis....
5 pts Currently, record numbers of Canadians are becoming unemployed due to the ongoing COVID-19 crisis. In this situation, how useful a measure is the unemployment rate? Briefly discuss.
In the midst of pandemic COVID-19, discuss critically how Malaysia can enhance the productivity towards achieving...
In the midst of pandemic COVID-19, discuss critically how Malaysia can enhance the productivity towards achieving the status of developed country and higher income economy?
Discuss about Uneven Development after COVID-19 crisis
Discuss about Uneven Development after COVID-19 crisis
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT