Question

Which of the following are NOT part of the 5Cs of credit? Select ALL applicable.

1. Conditions

2. Collateral

3. Candor

4.Character

5. Commitment

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In the 5 Cs of credit, what does capacity measure?

1. The company’s profitability and cash flow to manage operations and growth

2. The financial structure and overall financial strength of a company

3. The management’s attitude towards risk and growth

4. The assets available to secure the debt in the event of a default

Answer 1

Which of the following are NOT part of the 5Cs of credit? Select ALL applicable?

Ans: (3) Candor & (5) Commitment

Explanation:

The 5 C’s of credit are character, capacity, capital, conditions, and collateral.

Hence option 3rd'nd 5th are not part of the 5cs of credit

In the 5 Cs of credit, what does capacity measure?

Ans: (4) The assets available to secure the debt in the event of a default

Explanation:

In the 5cs of credit, capacity measures the ability to repay the loan.

If the company defaults, capacity measures how much asset does it have to pay the debt.

Hence 4th is the only correct option.

Capacity does not measure structure, attitude toward risk and profitability.

Therefore ( 1),(2 ) and (3) are incorrect option.