This service is offered to our clients to determine the creditworthiness of their customers. The objective of credit analysis is to verify an entity’s ability to meet its obligations as per their purchase terms. Our credit department will verify all the available information from your customer (analysis of financial statements, credit reports, business references, payment habits or history, etc.) to establish its financial strength and assign a credit limit.
In our analysis we establish some of the following ratios:
Current Assets/ Current Liabilities
This ratio is mainly used to give an idea of the company’s ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point.
Current Assets- Inventory /Current Liabilities
The quick ratio is more conservative than the current ratio, a more well-known liquidity measure because it excludes inventory from current assets. Inventory is excluded because some companies have difficulty turning their inventory into cash. If that short-term obligations need to be paid off immediately, there are situations in which the current ratio would overestimate a company’s short-term financial strength.
Current Assets /Current Liabilities
Positive working capital means that the company is able to pay off its short-term liabilities with its current assets. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). Summar works with major commercial database providers and credit insurance companies to better profile your customers and assign an accurate credit limit.