Developing investigative resources to make an analysis of risk, financial analysis performs a useful service to lenders and bankers especially to those that don’t want to bear risk.
The credit is supposed to stop where the risk starts hence the line between equity and debt of a company whose gearing ratio will be closely monitored.
Isn’t such limit a little bit too theoretical ?
The question deserves attention as there are many examples of failed businesses that have brought all partners in their rout.
In the context of alternative financing means to SMEs, we can only suggest to lenders and debt investors to require all necessary information to make their own judgement about the risk that they will bear.
Better to say it that way.
Dominique F. Pasquier