Borrower Cash Flow, Ratio Analysis and the First Way Out
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In this 2nd course of the Commercial Real Estate Underwriting Skill Series, participants will learn the difference between description and analysis, compute key financial ratios, identify borrowing causes and repayment sources, and assess traditional cash flow and UCA cash flow statements, including necessary net profit adjustments.
Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
Duration
1 hr.
Prep Time
1
Quiz
Overview
In the second webinar session, participants review the fundamental difference between description and analysis in presenting a financial statement review. They compute key financial ratios and identify likely borrowing causes and repayment sources based on the performance ratios. They examine and assess the computations of two popular cash flow measures - traditional "cash flow" or net income + non-cash charges and the Uniform Credit Analysis (UCA) cash flow statement. Participants identify borrowing causes and cash repayment sources based on the UCA cash flow statement. In addition, they explore the necessary adjustments to reported net profit to accommodate distributions, withdrawals, and loans to owners in establishing a borrower's ability to meet the two necessary conditions for business success.
Who Should Attend
This Course is ideal for participants currently in or aspiring to enter the following job functions:
- Credit Management
- Commercial Real Estate Administration
- Commercial Loan Portfolio Management
- CRE Lending
- Private Banking
- Loan Review
- Special Assets
- Construction Lending
- Credit Analysis
Prerequisites
Familiarity with accrual financial statements and accrual financial statement terminology for a commercial real estate operation, as well completion of Session 1.
Objectives
By the end of the webinar session, participants will be able to:
- Compute key financial ratios and identify their use in helping to establish the risk profile of a business, including implications for borrowing causes, repayment sources, and risks to repayment sources.
- Convert reported net income for non-Subchapter C corporations to actual business income, and understand the reasons for doing so, in assessing whether a company satisfies the first necessary condition for business success.
- Assess the benefits and limitations of traditional "cash flow" - net income + non-cash charges - in identifying borrowing causes and the cash sources of debt repayment.
- Assess the benefits and limitations of the Uniform Credit Analysis (UCA) cash flow statement in identifying borrowing causes and the cash sources of debt repayment.
- Identify the reasons for differences in risk assessment messages provided by traditional "cash flow" and the UCA cash flow statement and evaluate the possible adverse impact of relying on traditional "cash flow" to provide a measure of risk assessment.
- Explain the concepts underlying the second necessary condition for business success and determine whether the borrower was able to meet the condition.
Materials(access provided with registration)
- Credit Refresher on Accounting Profit and Business Profit
- Credit Refresher on The ABCs of Cash Flow
- Financial Statements for Sequoia Properties
- Exercise for the Session 2 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
- Webinar Poll Solutions
- Exercise Solutions
This is Course 2 of 8 in the Commercial Real Estate Underwriting Skill Series
The CRE Analytical Process and Credit Write-Up
Borrower Cash Flow, Ratio Analysis and the First Way Out
Personal Cash Flow, Guarantor Analysis and the Second Way Out
Appraisal Reports and Assessing Market Value
The Income Capitalization Approach and the Cap Rate
Underwriting Standards, NOI and Breakeven Analysis
Management Assessment, Competitive Forces, and Projected Performance
Repayment Risks and Covenants
