Final answer:
The decision to extend credit beyond the normal limit exemplifies authorization, which is a formal approval process in financial decisions, often involving the evaluation of creditworthiness and potential securities like cosigners or collateral.
Step-by-step explanation:
The decision to extend credit beyond the normal credit limit is an example of authorization. Authorization refers to the formal approval given to specific transactions, activities, or operations within a business. In the context of the financial capital market, prior to a bank extending a loan, it requires the prospective borrower to provide information on income sources and undergoes a credit check to assess creditworthiness. Additional security measures may include requiring a cosigner, who is legally obligated to repay the loan if the original borrower fails to, or collateral such as property or equipment, which the bank can seize and sell to recover the loan amount if necessary.
This involves assessing the borrower's creditworthiness, reviewing their financial information, and making a decision on whether to grant the loan or not.