Question

Why is it important to investigate early-warning signals of problem loans?

Answer 1

It is important to investigate early warning sign of problem loan as it will help the organisation in order to reduce their losses to large extent and it will also help them in order to keep their asset quality in a better manner because there need to be a better quality of assets into their books of accounts because better quality of Assets will always be helpful in order to survive and sustain through adverse economic situations.

An organisation should be getting their problem loans detected only because it will help them in order to recognise all the problem areas in your organisation and they will also be able to better their asset quality and they will also be able to have an opportunity at the time of adversity to maximize their market share because they will be having a strong books of accounts on their hands so it will always be better to recognise bad assets early and it will help the organisation in order to eliminate any kind of risk related to adversities and getting into any kind of financial distress so it is better to recognise them early and eliminate them or mitigate them.