Who is a Credit Analyst? A credit analyst is someone responsible for evaluating the risk factors that affect loans and debts. Credit analysts are trained individuals who have a financial background in examining loan applications. They are different from loan officers who assist clients throughout the loan process. Instead, credit …

The term risk represents any chance or uncertainty that an outcome will differ from the expected outcome. Usually, any scenario that consists of uncertain possibilities that can result in losses constitutes the risk for that scenario. There are various types of uncertainties that investors can face according to their active …

In the past, it was challenging for lenders to assess a borrower’s creditworthiness, which resulted in high credit risks. However, things have changed since that time. It is common practice for most lenders to check a borrower’s creditworthiness through credit ratings. These credit ratings usually come from agencies known as …

When making investment decisions in a company, investors consider various factors. Among these, profits are the most crucial as they can impact the investors’ future returns. However, a company’s earnings may not be meaningful if it has cash flow problems or operational inefficiencies. There are two terms, closely related to …

Capital structure defines the mix of debt and equity finance that a company has at its disposal. Every company utilizes a different combination of several finance sources to increase their benefits while decreasing costs. Companies can make a decision about their capital structure by using various models or theories. One …

A company’s capital structure defines the mix of equity and debt finance used to finance its activities. For every company, the capital structure will differ based on its needs and usage. This combination of equity and debt finance may also vary during a period or from one year to another. …

Hedge funds represent alternative investments where investors pool funds and employ different strategies. The goal with hedge funds, as with any other investment, is to earn active returns. Hedge fund managers gather funds from investors and invest them according to a promised strategy. However, hedge funds are mostly available to …

Default risk is a type of risk that accompanies all debt obligations. Default risk represents the uncertainty associated with repayments from borrowers. In case these risks realize, lenders can suffer a substantial amount of losses. Therefore, they need to protect against such occurrences. Usually, lenders check the borrower’s creditworthiness to …

What is an Expected Credit Loss? The term expected credit loss represents the amount of loss the companies estimate to have on their credits. It is a term used in accounting under the IFRS 9. Before the expected credit losses, companies recognized bad debts or credit losses only when they …

Default risk represents the chance that a borrower does not repay their debt obligation. Almost every loan or debt obligation comes with default risk. The higher the default risk is, the more unlikely it is for lenders to recover their loaned amount. Default risks can be crucial for lenders when …