Financial Statement Review and Ratio Analysis
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In this 2nd course of the Commercial & Industrial Business Underwriting Skill Series, participants will analyze financial statements, calculate key performance ratios, assess cash flow performance, identify debt service cash sources, and evaluate management's control of Business Drivers.
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Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
duration
1 hr.
Prep Time
1
Quiz
Overview
In the second webinar session, participants examine a borrower's financial statements to identify risk issues. They calculate and interpret key performance ratios to develop an assessment of borrower financial status and shifts in its risk profile, assess likely cash flow performance and identify the borrower's likely source of cash to service interest- bearing debt, and determine how well or poorly management controlled the Business Drivers in the last historical period.
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 Loan Portfolio Management
- C & I Lending
- Special Assets
- Credit Analysis
- Loan Review
Prerequisites
Familiarity with accrual financial statements and accrual financial statement terminology, as well as completion of Session 1.
Objectives
By the end of the webinar session, participants will be able to:
- Identify obvious risk issues that emerge from a review of specific accounts on a borrower's financial statements prior to the computation and assessment of key financial ratios.
- Identify the similarities and differences between and among Subchapter C corporations, Subchapter S corporations, partnerships, limited liability companies (LLCs), and sole proprietorships.
- Compute a range of key financial ratios and assess their use in helping to establish the risk profile of a business, including implications for borrowing causes, repayment sources, and risks to repayment sources;
- Identify the role of the Business Drivers - a subset of key financial ratios - in reflecting management's competence in pursuing profitability and positive cash flow;
- Understand the analytical reasons and perform the associated computations necessary to adjust reported net income for non-Subchapter C corporations to actual business income in assessing whether a company satisfies the first necessary condition for business success.
- Understand the analytical reasons and perform the associated computations necessary to adjust reported EBITDA for non-Subchapter C corporations to actual EBITDA after fully accounting for all owner compensation in the form of distributions and owner loans.
Materials(access provided with registration)
- Terms and Concepts - Business Organizations
- Credit Refresher on Accounting Profit and Business Profit
- Terms and Concepts - Financial Risk Indicators
- Financial Statements for Total Coverage, Inc.
- 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 & Industrial Business Underwriting Skill Series
Analytical Decision Tree and the Credit Write-Up
Financial Statement Review and Ratio Analysis
Cash Flow Analysis and Borrowing Causes
Projected Cash Flow, Management Assessment and the First Way Out
Guarantor Analysis and the Second Way Out
Non-Financial Red Flags and Performance Implications
Identifying and Mitigating Repayment Risks
The Credit Write-Up Again
