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CA Intermediate · Financial Management and Strategic Management · Management of Receivables

In the context of receivables management, the 'Five Cs of credit' used to assess a customer's creditworthiness include which of the following?

The Five Cs of credit are Character, Capacity, Capital, Collateral and Conditions. Firms use them to judge whether a customer is likely to pay on time. Terms like cost, collection, currency or compliance are not part of this standard credit appraisal framework.

  1. ACapital, Capacity, Character, Collateral and ConditionsCorrect
  2. BCash, Cost, Credit, Collection and Control
  3. CCapital, Cost, Character, Collection and Currency
  4. DCapacity, Collateral, Compliance, Cash and Conditions

Explanation

The standard Five Cs of credit are Character, Capacity, Capital, Collateral and Conditions. The other options include terms such as Cost, Collection, Currency or Compliance that are not part of the framework.

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