Question

When reviewing loan applications, Jessica, a loan officer at A+ Credit Union, always examines the amount of cash and marketable securities that applicants have on hand. She reviews historical, current, and projected cash flows of a business to gauge whether applicants are able to repay the loan. These activities best describe which of the five "Cs" of credit?

Answer 1

Answer: Capacity

Explanation: Under the characteristic of capacity, the reviewing authority tries to evaluate the ability of the opposite party if they are competent enough to pay the loan.

In the given case Jessica considers the amount of liquid assets that the opposite party have, which is a reasonable criteria to understand the liquidity position.