Credit Analysis Level 1

2 day course on Practical Credit Analysis

Objectives:

At the end of this session all delegates should be able to:

• State the fundamental elements in the risk analysis process
  
  
• Identify the key risk areas in any given situation
  
  
• Explain the relationship between financial and non-financial information in the credit analysis process
  
  
• Demonstrate the difference in perspective between the lender and the accountant in analysing financial statements
  
  
• Competently spread the accounts of a company
  
  
• State why ratios are such a useful analytical tool for the credit provider
  
  
• Calculate the main categories of ratios used by the lender
  
  
• Use ratio analysis as part of the process of establishing a company's credit worthiness

Contents:

The Credit Environment

• Stages in the analysis process
• Analytical framework
• Levels of risk
• The relationship between different types of information

Financial Information

• Legal framework/environment
• Types of financial information
• Importance of the time factor
• Pre-spreadsheet analysis
• Accounting rules and regulations
• International differences

The Balance Sheet and Profit and Loss Account

• Reporting formats
• The accountants perspective
• The lenders perspective
• A structure for spreadsheets
• Key issues

Spreadsheets

• Manual input
• Initial conclusions
• Establishing trends

Ratio analysis

• Uses
• Categories
• Sales growth
• Profitability
• Liquidity
• Efficiency
• Leverage and gearing
• Solvency

Interpretation

• Establishing trends
• Areas of strength and weakness
• Causes and consequences
• Implications for the future
• Bank response