Debt Capacity and Cash Flow
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In this 5th and final course of the Cash Flow Analysis & Applications Skill Series, participants will explore debt capacity, its importance in debt servicing, and the roles of dividends, distributions, taxes, and loans. They address conflicts between debt capacity and cash flow, emphasizing quality financial information and corrective measures.
Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
Duration
1 hr.
Prep Time
1
Quiz
Overview
Participants explore the concept of debt capacity and its importance in assessing a borrower's prospects for properly servicing its interest-bearing debt. They identify the roles of dividends, distributions or withdrawals, income taxes, and loans to owners or partners in arriving at an estimate of existing and prospective debt capacity. In addition, Participants determine reasons for apparent conflicts between debt capacity estimates and actual operating cash flow. They review the importance of quality financial information in validating debt capacity estimates and they identify the range of corrective measures available to both borrower and lender should a borrower's debt capacity fail to support outstanding, or proposed, interest-bearing debt.
Who Should Take This Course
This Course is ideal for participants currently in or aspiring to enter the following job functions:
- Credit Management
- Commercial Credit Administration
- Commercial Real Estate Administration
- Commercial Loan Administration
- C & I Lending
- CRE Lending
- Corporate Lending
- Loan Review
- Special Assets
- Internal Audit
- Construction Lending
- Non-Profit and Municipality Lending
- Health Care Provider Lending
- Private Banking
- Specialized Lending
- Credit Analysis
Prerequisites
Familiarity with financial statements, ratio analysis, cash flow proxies such as EBITDA and traditional "cash flow", and operating cash flow statements such as the FASB 95 statement of cash flows and the Uniform Credit Analysis (UCA) cash flow statement.
Objectives
By the end of the webinar, participants will be able to:
- Understand and state the concept of debt capacity and its importance in assessing a borrower's ability to properly service its interest-bearing debt.
- Identify the benefits and limitations of operating profit and cash flow as measures that drive and determine debt capacity.
- Identify the role that dividends, distributions, withdrawals, and loans to owners and partners play in estimating debt capacity.
- Identify the reasons for differences in cash flow proxies and actual operating cash flow statements in measuring a company's ability to service its interest-bearing debt.
- Assess the importance of apparent conflicts between estimates of debt capacity and actual cash flow performance in a given period of time.
- Identify the possible corrective measures at the disposal of a borrower and its lender should the borrower lack sufficient debt capacity to properly service its debt.
Materials(access provided with registration)
- Credit Refresher on How Much Debt
- Credit Refresher on The ABCs of Cash Flow
- Credit Refresher on FASB 95 Statement of Cash Flows
- Financial Statements for D & J Installation Contractors
- Historical Financial Statements for Information Access, Inc.
- Projected Financial Statements for Information Access, Inc.
- Exercise for the Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
- Webinar Poll Solutions
- Exercise Solutions
This is Course 5 of 5 in the Cash Flow Analysis & Applications Skill Series
Global Cash Flow
Working Capital and UCA Cash Flow
Ratio Messages On Profitability and Cash Flow
Covenant Use in Controlling Cash Outflows
Debt Capacity and Cash Flow
