ZIMSEC O Level Business Studies Notes: Factors to consider when offering capital
- Financial institutions such as banks and micro lenders consider a lot of factors when they are considering whether or not to deny a business’s request for a loan or capital
- Some of the things they take into consideration include:
- Non-financial information such as:
- The names of the business’s owners or representatives,
- Their residential addresses of these applicants
- The name of the business
- The type of business in which the business is involved in
- They also consider financial information such as:
- The business’s balance sheet so that they can know the financial position of the business
- The balance sheet also enables the potential lenders to determine the business’s
- liquidity for example using the Current Asset ratio
- The business’s profit and loss account so that they
- can determine its profitability and thus ability to be able to repay its creditors as well as determine
- Its efficiency in converting sales into profit
- The lenders might also want to look at a business’s Cash flow statement
- And thus be able to determine its cash flows and try and gauge its ability to repay its debts in the future.
- The lenders might also want to determine and know the business’s representatives’s credit worthiness
- This will help them know if they can recover their money if businesses with unlimited liability fail to settle their debts
- The lenders might also want to know the occupation and salaries of the owners for the same reasons
To access more topics go to the O Level Business Notes page.
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