Considering the 5 C's of credit, what does capacity signify?

A) The customer's willingness to meet credit obligations.
B) The customer's ability to meet credit obligations out of operating cash flows.
C) The customer's financial reserves.
D) A pledged asset in the case of default.
E) General economic conditions in the customer's line of business.

5 C's of Credit

The five key elements lenders evaluate to assess a borrower's creditworthiness: character, capacity, capital, collateral, and conditions.

Capacity

The maximum level of output that a company can sustain to produce within a specified period under normal conditions.

Operating Cash Flows

The amount of cash generated by a company's normal business operations over a specific period.