What financial instruments potentially expose The C12 Group to credit risk?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company is subject to the Texas margin tax.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Advertising: Advertising costs are expensed as incurred and amounts are insignificant.
Concentrations of Risk: Financial instruments that potentially expose the Company to credit risk consist principally of cash and trade accounts receivables. The Company occasionally maintains cash balances in financial institutions that exceed the amounts insured by the FDIC. The Company periodically assesses the financial condition of the institutions and believes that the risk of loss is minim
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 FDD, C12 Group is potentially exposed to credit risk through its cash and trade accounts receivables. C12 Group occasionally holds cash balances in financial institutions exceeding the amounts insured by the FDIC. As of December 31, 2024, cash balances exceeding the insured limit totaled approximately $718,000. However, C12 Group assesses the financial condition of these institutions periodically and believes the risk of loss is minimal.
In addition to cash holdings, C12 Group faces credit risk from trade accounts receivables. To mitigate this risk, C12 Group performs ongoing credit evaluations of its customers and generally does not require collateral. This practice is common in industries where the risk of significant financial loss from customer defaults is considered low.
Prospective franchisees should be aware of these potential credit risks, although C12 Group management believes the risk of loss is minimal due to their ongoing assessments and credit evaluations. It is important to note that while the franchisor believes the risk is minimal, external economic factors could change, potentially increasing the credit risk exposure.