Maturity analysis is a very useful tool in risk management. It makes it easier to make the right lending and investment decisions. Learn more about it here.
What is maturity analysis? Definition of the term
Maturity analysis is one of the most important elements in financial management. It allows companies to determine how much credit they will have to give to a customer so that he can pay the installments on time. It also answers the question of whether the customer will be able to obtain credit. This is one of the most important financial decisions companies have to make.
What is maturity analysis based on?
Maturity analysis is based on an examination of a customer’s credit history. With its help, it is determined what the customer’s chances are of meeting his financial obligations. When assessing maturity, factors such as age, income capacity, credit history and current financial obligations are taken into account. The company can also assess whether it will be profitable to provide the customer with additional credit.
The maturity analysis process is part of the lending process. The company must verify that the customer has sufficient collateral to make the installments. The company can use its own analytical tools for this, or use the services of a credit agency. Before starting the maturity analysis process, the company should determine what its criteria are for granting credit.
For what purpose is a maturity analysis conducted?
Maturity analysis is often used to assess risk in lending or borrowing. Banks and financial institutions use it to determine a borrower’s ability to repay his financial obligations. Banks hope that maturity analysis will help them avoid non-payment of loans or credits.
Maturity analysis can also be used to assess investment risk. Insurers that offer investment loans are required to conduct a maturity analysis to ensure that they will be able to enforce the customer’s repayment of the loan.
A maturity analysis can also help determine the withdrawal and deposit requirements of a venture. It can also be used to assess investment risk and determine the potential return on investment.
