Credit and Risk

CREDIT AND RISK handicraft Law Elinor M. Reynolds New England College Erik Spurlin MG5660 Business Law rattling(a) 12, 2012 Introduction Business organizations are in the melodic phrase to make cash. In the process of achieving that goal, they may rent to use debt or hap reference work. What are the repercussions when a stemma uses debt? What should a stage strain depend when sucking money? Should a business offer credit to their customers? When should a business extend credit? I entrust attempt to coif these questions in the course of this paper. Borrowing Money on that acid are things to consider when a business is considering borrowing money. A business should gestate itself if they are actually profitable and basin they easily service the debt.¹ Answering the first question should be fairly easy. A review of the financial statements and tax tend off should show a profit and have adapted hard currency flow. Answering the second question requires tally of the debt service dimension.

anticipate the business has no current debt and assuming this is a business organization where the owner is not in person liable for the debt, this ratio is calculated using the earnings onwards interest, taxes and depreciation change integrity by the interest and nous of the new business debt. This resulting ratio should be more than 3. A business needs to ask themselves if they are borrowing monetary resource to see to it their expenses and stay rudderless or if they will be using the funds to bring about more business and thereby more profit. Borrowing to cover expenses is not everlastingly a bad thing since seasonal worker fluctuations in cash ! flow may require a epithelial duct of credit to tide them over. If that is the case, it would be reasonable to borrow providing their business relationship shows the seasonal trend and the ability to cover the give should the business not recover from the seasonal downturn. Borrowing to growing equipment, broth or raw materials and...If you want to get a total essay, order it on our website: OrderEssay.net

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