Which activity allows lenders to understand business trends and early warning signs?

The activity that enables lenders to understand business trends and early warning signs is the annual review. This process typically involves a comprehensive assessment of a borrower's financial statements, performance metrics, and overall business strategy conducted on a regular basis, usually once a year. By reviewing financial performance over time, lenders can identify trends in revenue, expenses, and profitability, as well as any significant changes in the business's financial position.

Through the annual review, lenders can also gather insights into the borrower's industry outlook and operational shifts, allowing them to foresee potential risks or warning signs that may affect the borrower's ability to repay loans. This proactive approach helps lenders make informed decisions regarding credit management and risk assessment, ultimately enhancing their relationship with borrowers.

While financial statement analysis and performance benchmarking also provide valuable insights into a company's health and performance, they do so largely on an ad hoc basis rather than as part of a systematic, annual process that incorporates both current data and historical trends. Metal analysis is less relevant in this context, as it specifically relates to industries dealing with metals rather than general business trends.