Capacity Analysis. To determine the borrower's ability to service its debt, credit analysts perform industry analysis before turning their attention to company-specific assessment. Industry analysis involves consideration of the competitive forces in the industry such as the threat of entry of new competitors, the bargaining power of suppliers, the bargaining power of customers, the threat of substitutes and rivalry among existing competitors. Analysts also want to understand the industry fundamentals such as sensitivity to macroeconomic factors to understand the cyclicality and growth prospects. It is at this stage that analysts should take care to understand how environmental and social factors impact the sector. These include regulatory changes, legal factors, market changes, and technological changes. The analyst would scrutinize the company's financial statements and work out financial ratios to understand the company profitability and cash flow, operating efficiency, leverage, and liquidity. Assessments of liquidity would include looking at the cash on the balance sheet, working capital requirements, operating cash flows, committed bank lines and analysis of debts falling due and committed CapEx in the next year or two. Issue analysis would also need to consider ESG risks that the specific business faces and the materiality of such risk. So at this stage, the analyst would need to consider the possibility for environmental fines, the burden arising from the need to pay higher taxes on carbon emissions or the higher costs of securing greenhouse gas emissions permits. Equally, any additional operating costs or capital expenditures associated with compliance with incoming regulation or commitment to waste management or use of new, more environmentally friendly materials would need to be considered. Alternatively, the analysts may wish to consider the impact of changes in regulation or the fact that competitors products may have better environmental characteristics that may lead to consumers switching to the environmentally less harmful competitor products. In social risks, a point of differentiation may arise due to poor industrial relations where competitors have a better social track record which may become an issue over time.