Question

The overarching purpose of credit risk analysis is to: Question 11 options: a) Identify credit opportunities b) Determine a company’s optimal capital structure c) Provide information to banks about credit losses d) Quantify potential credit losses

Answer 1

Answer:

d) Quantify potential credit losses

Explanation:

Credit risk is the possibility of a loss happening because of a borrower's failure to payback a loan or meet up with contractual obligations. The overaching purpose of credit risk analysis is the quantification of the level of credit risk that the borrower poses to the lender. The purpose of credit analysis is to determine if borrowers are credit worthy by quantifying the risk of loss that the lender may experience.

Therefore option D is the answer.