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"Loss" is an accounting term indicating that for a given period of time expenses were greater than earnings, leading to a negative position. However, this is the result of the wholeaccounting procedure.
On the other hand, "cash loss" means that you have a negative cash flow, you not only are shortof cash but you have borrowed also. It ts a very bad situation creating serious problems for a company. Bear in mind that it is not loans that lead companies to bankruptcy but cash flows.
Credit limits are set based on a number of risk factors which is derived from a client's Risk profile and Company Policy. These risk factors will be entered into a client "Scorecard" which assist the Credit Manager in determining the credit limit. Examples of risk factors: Client's background, namely client's employment, how long he/she working, client's residence, renting or owner, client's credit profile, ect. The terms and conditions of any agreement will within Company policy.
