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Organisations and the financial system
Organisations and the financial system

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C

Collateral

An asset that a lender accepts as security for a loan. In event that the borrower defaults on their loan payments, the lender can seize the collateral and resell it to recoup the losses suffered.


Credit rating

A credit rating is a score which reflects the opinion of a credit rating agency or a credit reference agency about the credit worthiness of an individual, a corporation, a financial obligation or even a country. The rating is intended to provide the market with an evaluation of a potential borrower's ability to service and repay its obligations in the future. The rating is prepared either by a rating agency typically on a solicited basis, i.e. at the request of the lender and/or debt issuer, or by a reference agency on an unsolicited basis, i.e. without consultation using publicly available information.


Current assets

Current assets are assets which remain in a business only a short time or change over time. A good example would be raw materials purchased for manufacture, which would be used up in a production process and replaced.


Current liabilities

Current liabilities are amounts owed by a business to others that are payable within one year at the end of an accounting period. There are several different types of items which could be included in current liabilities, but trade payables, accruals and short-term loans are common examples.