Credit risk is the risk incurred by the extension of credit to customers. It can also refer to the credit risk of the company with their own suppliers. An enterprise has a financial risk as it provides the funding for the customers, because of the possibility that customers may default on payments. A company must handle their own credit obligation by ensuring that it always has sufficient cash flow to pay its accounts to pay bills in a timely fashion. If not, the supplier can either stop expanding credit to the company, or even stop doing business with the company entirely.
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