A Report on 'Operating with Impunity'

The article is about a piece of land that was illegally obtained but continues with the business as usual on the said piece of land. Ordinarily, a lender is required to obtain a statement of finance from a borrower in an agreement so that they can analyze the financial condition of the prospective buyer. For a sole proprietor, are basic compared to those of a company Sathye and Bartle (6). A credit analysis, on the other hand, is an analysis that a bond portfolio manager or an investor does o a company or other organizations that are involved in the process of measuring the ability to meet the obligations of the required standards. The credit analysis aims to find out whether an appropriate default risk is involved in the course of investing in a particular entity. The analysis helps to identify whether a company can pay its debts and also to know the credit analysis Barone (2019).

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After conducting the analysis, the next process is to assess the risk that results from credit and the probability of defaulting payment together with experiencing losses, especially to the lender. If a borrower defaults to repeat the loan that they borrowed then the risk is at hand. If there are default risk and severity loss, then the primary product expected is a loss. Risk is defined as a downgrade when the issuer creditworthiness declines. The rates of recovery are different depending on the issuer CFA Institute (2019). There are five vital things to consider in credit analysis. Credit analysis was done based on some personal qualities of an individual or an organization they are; character, capacity, collateral, conditions and the capital. For a company, it is usually the financial statements that are consulted as stated earlier. These assessments are fundamental because they help the company to assess the outcome of their work. The analysis can be done through ratio analysis which falls under cross-sectional technique, time series technique or combining the financial statements and that which is not financialHuyen (49).

For lending institutions like banks, the loans are the significant risk although there are other risks for example in the banking book and trading book. There is another credit risk apart from loans that the bank still faces, for instance, inter-bank transactions, trade financing, transactions of foreign exchange, bonds and equities among others. The exposure continues leading to other problems in banks all over the world. Banks should be keen and beware of the risks and be in a position to know when a risk exists a way that they can control it and establish ways that they will manage to handle or deal with the risk in case it occurs on them. There should be an adequate way to control the risk, a proper administration should be established, there must be credit control to minimize the risk, the credit grant process should be in order, and the environment should be appropriate Principles for the Credit Management Risk (2019).

The process of lending money is a very crucial one, especially for lenders. They should be able to assess if the borrower can repay or else they will end up suffering losses that they may not be able to recover from. There are vital factors like duration and the amount of money that they are lending which is also critical to look at. The debt amount is also an essential factor that they should consider; where a borrower has a debt in some other place yet, they want more from them. They should be able to asses some risk factors that come along with the challenges that may result from the default of the borrower. If the loan is of social use, then a lender may issue it to maintain a good working environment that will help to grow the number of borrowers. The money lending agreement is one that requires critical attention especially for lenders Inc. (2019).

References

Barone A. (2019). Credit Analysis. Retrieved from https://www.investopedia.com/terms/c/creditanalysis.asp

CFA Institute (2019). Fundamentals of Credit Analysis. Retrieved from https://www.cfainstitute.org/membership/professional-development/refresher-readings/2019/fundamentals-credit-analysisHuyen T. (2003). Credit Analysis and Lending Management. Retrieved from https://www.academia.edu/7038188/Credit_analysis_lending_management_PDF

Inc. (2019). Credit Evaluation and Approval. Retrieved from https://www.inc.com/encyclopedia/credit-evaluation-and-approval.html

Principles for Credit Management Risk (2019). Retrieved from https://www.bis.org/publ/bcbsc125.pdf

Sathye M. & Bartle J. (2017). Credit Analysis and Lending Management 4th Edition. Retrieved fromhttps://mirabelpublishing.com/system/storage/download/r8Vr21s6rp66lMTydbQAJZjGBZQ4LlUZ.CALM_booklet.pdf