- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 27. Applications of Financial Statement Analysis
- Subject 3. Assessing Credit Risk
CFA Practice Question
Which of the following is the most useful to an analyst assessing the creditworthiness of a company? Information related to ______.
B. the scale and diversity of a company's operations
C. efficiency of a company's operations
A. operating cash flow
B. the scale and diversity of a company's operations
C. efficiency of a company's operations
Correct Answer: A
Credit analysis is concerned with a company's debt-paying ability. Returns to creditors are normally paid in cash, so the company's ability to generate cash internally is the most important factor in credit analysis.
User Contributed Comments 2
| User | Comment |
|---|---|
| robbiecow | Credit Analysis involves the evaluation of the 4 "C's" of a company. 1. Character 2. Capacity 3. Collateral 4. Covenants The four general categories of items considered in credit analysis are: 1. Scale and diversity 2. Op. efficiency 3. Stability and sustainability of prof. margins 4. DFL |
| Freddie33 | DFL? |