ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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4 Cs OF CREDIT Definition
4 Cs OF CREDIT are the four primary considerations that will affect a lenders decision to approve or decline your loan application. Known as the 4 C's of credit:
- Capacity - what is your ability to repay the loan? Do you have a job or another income source? Do you have other debts?
- Character - will you repay the loan? Have you used credit before? Do you pay your bills on time?
- Collateral - if you fail to repay your loan, is there something of value that you agree to forfeit? For example, if you are buying your first car, it could be used as collateral to insure that you will repay the loan. If you default, you lose your car.
- Capital (accumulation) - what are you worth? Do you have other assets, such as a savings account, car, or certificate of deposit that could be used to repay the debt?
Learn new Accounting Terms
GLOBAL DEPOSITORY RECEIPTS are receipts evidencing ownership in the underlying shares of a foreign company. Generally, U.S. banks and trusts issue American depository receipts (ADR) and American depository shares (ADS). They hold the foreign company securities underlying the receipts in their vaults. In addition to the underlying securities, the receipts entitle the shareholder to all dividends and capital gains. The bank or trust company issuing the receipts may have denominated the receipts in a currency other than the currency underlying the foreign security. U.S. and European banks and trust companies usually issue global depository receipts (GDR), which are receipts in the shares of global offering of a foreign issuer who has issued two securities simultaneously in two markets, usually publicly in non-U.S. markets and privately in the U.S. market. European banks and trust companies generally issue European depository receipts (EDR), sometimes called continental depository receipts (CDR) when issued in bearer form, which evidence ownership in foreign securities.
RESERVE CAPITAL is that part of the nominal (current value) of a business that has not yet been called up. It is thus a reserve, which can be drawn on in case of need.