Understanding financial terminology is essential when reviewing credit reports and making business decisions. This comprehensive glossary explains key terms you'll encounter in credit reports, financial statements, and business assessments. Use this reference to better interpret financial information and make informed decisions about credit and business relationships.

A

Assets

Any resource owned or controlled by a company or individual that has economic value and can be converted into cash, such as cash, property, investments, or inventory.

Assets Backing Ratio

A financial ratio that measures the proportion of a company's tangible assets in relation to its total liabilities, indicating the security of creditors' investments.

Asset Turnover

In finance, asset turnover (also known as total asset turnover or asset turns) is a financial ratio that evaluates how efficiently a company utilises its assets to generate sales revenue or income.

B

Bankruptcy

A legal status for individuals or entities unable to repay outstanding debts, as declared by a court order.

Basis Credit Report

A comprehensive report provided by CTOS Basis, offering detailed credit information, financial analysis, credit ratings, and industry outlooks for businesses.

C

Capacity

It refers to the study of the management capacity in performing contracts or undertaking projects and the degree of client diversification.

Capital

It refers to an evaluation of the financial position of the Subject by taking into consideration its capital adequacy, management efficiency, earning, liquidity and leverage position.

Cash Convertible Assets (CCA)

Assets that can be quickly converted into cash without significant loss of value, such as bank deposits, marketable securities, and short-term investments.

Cash Flow Statement

A financial report detailing the inflows and outflows of cash in a business, helping assess liquidity and financial stability.

Cash Ratio

A liquidity ratio that measures a company's ability to cover its short-term liabilities using only cash and cash equivalents. Formula: Cash & Cash Equivalents ÷ Current Liabilities.

Central Credit Reference Information System (CCRIS)

A system managed by Bank Negara Malaysia that compiles credit information from financial institutions, providing a centralised credit report for individuals and businesses.

Collateral

An asset pledged by a borrower to secure a loan. If the borrower defaults, the lender has the right to seize the collateral as repayment.

Condition

It refers to the benchmarking and trend analysis of Subject performance against the macro-economic and industry data.

Contingency

It refers to the study of the asset quality and the readiness of the Subject to face any untoward event in the future.

Contingent Liabilities

Potential liabilities that may occur based on the outcome of an uncertain event, such as lawsuits, pending tax disputes, or financial guarantees.

Credibility

It refers to the Subject's credibility in honouring its obligations through an evaluation of its payment records and credit history.

Credit Bureau

An agency that collects and maintains individual and business credit information, providing credit reports and scores to lenders and creditors.

Credit Limit

The credit limit is determined based on the Subject's financial health, payment record, industry outlook, and credit history and adjusted accordingly, referencing the credit rating identified. The proposed credit limit of the evaluated Subject is the recommended outstanding total amount of credit to the Subject at any time.

Credit Rating

An evaluation assigned to an individual or company based on creditworthiness and financial history.

Credit Report

A detailed report outlining an individual's or company's credit history, including outstanding debts, repayment history, and public records.

Credit Risk Evaluation

An assessment of a company's ability to meet financial obligations, based on its credit history, financial stability, and debt levels.

Creditors Ratio

The creditors ratio, also known as the accounts payable turnover ratio, measures how often a company pays off its suppliers and short-term liabilities, calculated as Trade Payables ÷ Cost of Goods Sold × 365 days. A higher ratio indicates faster payments to creditors, while a lower ratio may suggest cash flow issues or delayed payments.

CTOS Score Report

A comprehensive credit report from CTOS that includes a 3-digit score reflecting an individual's or company's creditworthiness, based on their credit history and financial obligations. This report provides detailed credit information, including payment history, legal proceedings, and other relevant financial data, to assess the likelihood of defaulting on loans or other financial commitments.

CTOS SME Score

A proprietary credit score that assesses small and medium enterprises' creditworthiness by evaluating risk factors, helping lenders make informed decisions. Scores range from 100 to 400, with higher scores indicating better credit viability and access to financing.

Current assets

Short-term assets that can be converted into cash within one year, such as cash, accounts receivable, and inventory.

Current liabilities

Short-term financial obligations that must be paid within one year, such as accounts payable, short-term debt, and accrued expenses.

D

Days Working Capital

Refers to a company's operational efficiency by measuring the time needed to turn working capital into revenue.

Debt to Asset Ratio

A solvency ratio that indicates the percentage of a company's assets financed by debt. Formula: Total Debt ÷ Total Assets.

Debt to Equity Ratio

The debt-to-equity ratio (D/E) is a financial metric that compares a company's total debt to its shareholders' equity. It indicates the proportion of financing that comes from creditors versus investors, helping assess the company's financial leverage and risk.

Debtors Ratio

A financial ratio that measures how efficiently a company collects debts from customers.

Default

Failure to meet the legal obligations of a loan, such as not making the required payments.

Defaulter

An individual or entity that has failed to repay a loan or meet debt obligations.

Default Rate

The percentage of loans or credits within a portfolio that have defaulted, used to assess credit risk. It is the probability of the Subject with a given credit rating default within the next 12 months period. The Subject is deemed default upon the first occurrence of any of the events such as a missed or delayed disbursement of interest and/or principal, a distressed exchange with creditor, company winding up or company dissolution. Default rate is generated from the statistical stochastic model, namely Transition Probability Matrix (TPM) Model.

Dividend

A portion of a company's profits distributed to shareholders as a return on investment.

Dividend Payout Ratio (Times)

The Dividend Payout Ratio (DPR) measures the proportion of a company's net income that is distributed to shareholders as dividends. It reflects how much profit is returned to investors versus how much is retained for business growth.

Directors

Individuals appointed to oversee company operations, decision-making, and governance.

E

Earnings Before Interest & Tax (EBIT)

Earnings Before Interest and Taxes (EBIT) is a financial metric that measures a company's profitability. It includes all revenues and expenses, except interest and income tax expenses. Thus, it reflects a firm's operating performance before the impact of financing and tax decisions.

Earnings Before Interest, Taxes, Depreciation And Amortization (EBITDA)

A financial metric that assesses a company's profitability and operational efficiency by excluding non-cash expenses like depreciation and amortisation.

F

Financial Highlights

Key financial data and metrics that provide an overview of a company's financial performance.

Financial Statement

A document summarising a company's financial performance, including balance sheets, income statements, and cash flow statements.

Fixed Assets

Long-term physical or tangible assets, such as property, equipment, and machinery, used in business operations.

G

Gearing Ratio

The gearing ratio is a financial metric that assesses a company's leverage by comparing its reliance on debt versus equity to fund its operations.

I

Industry Outlook

A report providing insights into the current trends, risks, and growth potential of a specific industry.

Insolvency

A financial state where an individual or organisation cannot meet debt obligations, potentially leading to legal proceedings like bankruptcy.

L

Liabilities

Obligations a company owes to others, including loans, accounts payable, salaries, and taxes.

Liabilities Ratio

A financial ratio that assesses a company's total liabilities in relation to total assets, indicating financial risk.

Litigation

Legal action is the process of taking legal action. In credit reporting, it refers to records of legal proceedings involving financial disputes.

Liquid Ratio

A measure of a company's ability to meet short-term obligations using liquid assets.

Long Term Liabilities

Long-term liabilities are debts and obligations a company owes to third-party creditors that are due beyond one year, including bonds, leases, and long-term loans.

N

Net Dividend

The amount of dividends paid to shareholders after deducting tax and other liabilities.

Net Worth

The difference between a company's total assets and total liabilities indicating financial health.

Non-Current Assets

Assets that cannot be converted into cash easily and are typically held for long-term use, such as property and equipment.

Non-Current Liabilities

Long-term financial obligations that are not due within the next 12 months, such as long-term loans.

Net Monetary Assets

Refers to the difference between a company's monetary assets (such as cash, accounts receivable, and investments) and its monetary liabilities (such as accounts payable and debts). It represents the company's liquid financial position and ability to meet short-term obligations.

Net Profit Margin

A profitability ratio that measures how much net income is generated from total revenue.

Net Tangible Assets

The total physical assets of a company after deducting intangible assets (like goodwill and patents) and liabilities.

O

Operating Profit Margin

A profitability ratio showing the percentage of revenue that remains as operating profit after deducting operating expenses.

P

PAT Margin (Profit After Tax margin)

A profitability ratio that measures net income as a percentage of revenue after tax deductions.

Paid Up Capital

The total amount of capital paid by shareholders in exchange for shares issued by the company.

Payment History

A record of an individual or company's past payments on credit accounts, indicating punctuality and reliability in repaying debts.

PBT Margin (Profit Before Tax Margin)

A financial metric that indicates a company's profitability before accounting for tax expenses.

Proposed Credit Limit

A suggested borrowing limit based on the credit risk assessment of an individual or business.

R

Return On Capital Employed (ROCE)

A financial ratio that measures a company's ability to generate profit from capital investments.

Return On Net Assets

A performance ratio measuring how effectively a company uses its net assets to generate profit.

Return On Shareholders' Funds/Equity

A profitability ratio showing how much profit a company generates per unit of shareholder equity.

Retained Earnings

Accumulated profits or losses that a company retains for reinvestment rather than distributing as dividends.

Revenue

Total income generated from business operations, including sales and services.

S

Share Capital

The total value of shares issued by a company, representing ownership in the business.

Shareholders

Individuals or entities that own shares in a company giving them partial ownership.

Share Premium & Reserve

The extra amount paid by shareholders for shares above their nominal value, held as reserves for financial stability.

SSM (Suruhanjaya Syarikat Malaysia)

Also known as the Companies Commission of Malaysia, it regulates companies and businesses, providing official information and registration details.

Stock Ratio

A financial ratio that measures inventory efficiency by comparing stock levels to sales.

T

Tangible Net Worth (TNW)

A company's net worth, excluding liabilities and intangible assets such as copyrights, patents, and intellectual property, showing its real asset value.

Times Interest Earned Ratio (TIE)

A ratio that measures a company's ability to pay interest expenses using operating income.

Total Assets

The sum of all assets owned by a company, including current and fixed assets.

Total Borrowings

The total amount of debt a company has, including short-term and long-term loans.

Total Liabilities

The total financial obligations of a company, including debts and payables.

Total Share Capital

The total value of issued shares representing company ownership.

Total Reserves

Accumulated profits retained in a business for reinvestment or future use.

Trade Reference

Indicates payment behaviour as reported by suppliers, vendors, or business partners. In Malaysia, businesses can submit trade references for debts exceeding RM300 and overdue for more than 60 days, offering real-world insights into a company's creditworthiness.

Transition Probability Matrix (TPM) Model

TPM Model consists of a rating transition probability matrix built based on a discrete-time Markov chain using the Cohort approach along with time homogeneity and non-informative transition assumptions.

W

Working Capital

Working capital, or net working capital (NWC), is the difference between a company's current assets—such as cash, accounts receivable, and inventory—and its current liabilities, including accounts payable and short-term debts. It reflects the company's ability to manage short-term financial obligations and operational needs.

Y

Year-over-Year (YOY) Growth

A financial metric that compares a company's performance over the same period in previous years.