analysis and its applicability in the context of individual borrowers as well as the issuers that deal in debt securities. There is also a brief history of credit analysis.
Overview of Credit Analysis
The process of credit analysis may be explained as a procedure, which is carried out in order to find out the capacity of an issuer to provide some credit to the debtor. This process is applicable to individual borrowers as well as the issuers of securities.
A Brief History of Credit Analysis
The process of credit analysis has a long tradition. Even though there is no concrete date as such though. However, it is known that the credit for the origin of the system of credit analysis could be given to the bankers in Europe who operated in the medieval ages.
Importance of Credit Analysis of Individual Borrowers
In case of the individual borrowers the system of credit analysis is used in order to measure the economic capability. This is done in the context of repayment of debt. The system tries to find out if the borrower would be able to pay his debts at the proper time. With the help of credit analysis the lenders can also find out if the debtor would at all be able to pay back the debt.
Use of Credit Analysis of Corporate Entities
The system of credit analysis is also applicable for reviewing the financial capacities of a certain issuer who is dealing in debt instruments. This process is thus extremely crucial for those who put their money in these debt instruments as their investment decisions are guided by the financial capacity of the issuer.