Credit Basics examines the use and application of the analytic tools and techniques required to determine if a loan request qualifies for further analysis and assessment. At the end of the four online sessions, participants will understand the difference in business organizations, the role that distributions and loans to owners play in the analytical process, the computation and interpretation of key performance ratios, the use and limitations of cash flow proxies and the Uniform Credit Analysis (UCA) cash flow statement, and the impact management competence and expertise exert on a company's performance.
Target Audience
Analysts, lenders, relationship officers, and branch managers interested in mastering the basics of credit analysis in order to quickly identify and qualify a creditworthy prospect or borrower.
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1. Financial Statements and Business Organizations
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Recording
... different formats and different accounts
In the first webinar session, participants examine the similarities and differences in income statement and balance sheet accounts for a limited liability company, a Subchapter S corporation, and a sole proprietorship with emphasis on the existence or absence of income tax accounts, as well as explore the sequence and rationale for the flow of accounts. Further, participants identify the areas of similarity and difference between and among a Subchapter C corporation, a Subchapter S corporation, a partnership or limited liability company, and a sole proprietorship.
Target Audience:
Analysts, lenders, relationship officers, and branch managers interested in mastering the basics of credit analysis in order to quickly identify and qualify a creditworthy prospect or borrower.
Prerequisites:
Familiarity with accrual financial statements and accrual financial statement terminology.
Objectives:
By the end of the webinar session, participants will be able to:- Identify major differences in income statement accounts across several different business organizations.
- Identify major differences in balance sheet accounts across several business organizations.
- Identify reasons for changes in net worth accounts across several business organizations.
- Define liquidity and understand reasons for the sequence and flow of asset and liability accounts for several business organizations.
- Identify the major differences between Subchapter C corporations, Subchapter S corporations, partnerships and limited liability companies, and sole proprietorships.
- Identify how Total Coverage, Inc. is organized based on the initial call on its owner.
Materials and Preparation for this Course:
- Terms and Concepts - Business Organizations
- Financial Statements for Gemini Press
- Financial Statements for Fresno Properties
- Financial Statements for Sweet Feet
- Transcript for Initial Interview with Larry Crevin
- Exercise for the Session 1 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
Preparation
As preparation for the webinar session, please:
- Peruse the financial statements for Gemini Press, Inc., Fresno Properties LLC, and Sweet Feet.
- Read Terms and Concepts – Business Organizations.
- Read the written transcript for the initial interview with Larry Crevin, the owner and CEO of Total Coverage, Inc.
- Complete as many of the steps in the exercise as time allows prior to the webinar.
Program level: Intermediate
Recommended CPE credits: 2.4
Recommended field of study:Specialized Knowledge
Advanced Preparation: Printing and reviewing course materials
Delivery Method: Group Internet Based
2. Personal Qualities and Competitive Advantage
... soft data assessments
In the second webinar session, participants review a series of personal qualities that are both desirable and important to an entrepreneur's prospects for business success, as well as examine the sources of competitive advantage and the prospects of maintaining those competitive advantages over time. They do so by drawing on information in an audio interview with the owner of a small business that provides and installs floor coverings for large retail merchandisers and apartment complexes.
Target Audience:
Analysts, lenders, relationship officers, and branch managers interested in mastering the basics of credit analysis in order to quickly identify and qualify a creditworthy prospect or borrower.
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:- Assess the relevance of specific personal qualities that are beneficial to the business success of entrepreneurs.
- Identify those personal qualities that apply to a flooring contractor based on an audio interview.
- Determine if information in the audio interview supports further pursuit of a business relationship or whether there are too many red flags and uncertainties to suggest follow-on next steps.
- Identify the purpose of business strategy and the generic sources of competitive advantage.
- Identify specific sources of competitive advantage, if any, for the flooring contractor and assess the company's prospects of maintaining these competitive advantages.
- Determine if the combination of personal qualities and company competitive advantages are sufficient to pursue next steps toward a business relationship with the company.
Materials and Preparation for this Course:
- Transcript of Initial Interview with Larry Crevin
- Exercise for the Session 2 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
Preparation
As preparation for the webinar session, please:
- Review the written transcript for the initial interview with Larry Crevin, the owner and CEO of Total Coverage, Inc.
- Read the attached Sources of Competitive Advantage and Competitive Forces and Management Competence.
Program level: Intermediate
Recommended CPE credits: 2.4
Recommended field of study:Specialized Knowledge
Advanced Preparation: Printing and reviewing course materials
Delivery Method: Group Internet Based
3. Critical Ratios and the First Necessary Condition for Success
... a few ratios go a long way
In the third webinar session, participants explore the computation and interpretation of critical performance ratios in the process of establishing a company’s risk position and shifts in its risk profile from one period to the next. In addition, they review the first of two necessary conditions for business success following adjustments to reported net income that illustrate the actual profit position of a company. Finally, participants identify key areas of concern to the lender based on analysis of critical performance ratios.
Target Audience:
Analysts, lenders, relationship officers, and branch managers interested in mastering the basics of credit analysis in order to quickly identify and qualify a creditworthy prospect or borrower.
Prerequisites:
Some familiarity with an accrual income statement and balance sheet for a commercial business, as well as completion of Sessions 1 and 2.
Objectives:
By the end of the webinar session, participants will be able to:- Apply the methology necessary to properly compute key performance ratios.
- Understand the messages from the resulting performance ratios about a company’s risk position and shifts in it from one period to the next.
- Identify the impact of distributions and loans to owners on a borrower’s reported net income.
- Adjust reported net income for distributions and loans to owners and understand the different roles and classifications between loans to owners and loans from owners.
- Define the first necessary condition for business succcess and explain its rationale.
- Identify areas of interest to the lender in follow-up discussions with the borrower based on messages that emerge from an assessment of key performance ratios.
Materials and Preparation for this Course:
- Credit Refresher on Accounting Profit and Business Profit
- Terms and Concepts - Financial Risk Indicators
- Financial Statements for Total Coverage, Inc.
- Transcript for Follow-Up Call on Larry Crevin
- Exercise for the Session 3 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
Preparation
As preparation for the webinar session, please:
- Read the Credit Refresher.
- Review Terms and Concepts - Financial Risk Indicators
- Read the transcript for the follow-up call on Larry Crevin
- Complete as many of the steps in the exercise as time allows prior to the webinar.
Program level: Intermediate
Recommended CPE credits: 2.4
Recommended field of study:Specialized Knowledge
Advanced Preparation: Printing and reviewing course materials
Delivery Method: Group Internet Based
4. Non-Financial Red Flags and the Second Necessary Condition
... cash flow - the real bottom line
In the fourth and final webinar session, participants examine the use and limitations of traditional "cash flow" and explore a truncated version of the Uniform Credit Analysis (UCA) cash flow statement in identifying the source of cash to meet debt service. Further, they review the second of two necessary conditions for business success following examination of the cash flow snapshot format. Finally, participants examine an extensive list of possible non-financial red flags and identify their likely impact on company performance in the process of assessing whether to pursue a business relationship with Total Coverage, Inc.
Target Audience:
Analysts, lenders, relationship officers, and branch managers interested in mastering the basics of credit analysis in order to quickly identify and qualify a creditworthy prospect or borrower.
Prerequisites:
Some familiarity with an accrual income statement and balance sheet for a commercial business, as well as completion of Sessions 1, 2, and 3.
Objectives:
By the end of the webinar session, participants will be able to:- Identify the benefits and limitations in using tradtional "cash flow" - net income plus non-cash charges - in assessing a company's ability to meet its interest-bearing debt service from business cash flow.
- Construct an operating cash flow statement from income statement and balance sheet information and explain the rationale for doing so.
- Identify the similarities and differences in messages provided by traditional "cash flow" and the UCA cash flow statement about a company's ability to service its interest-bearing debt from business cash flow.
- Identify the reasons for fundamental differences between traditional "cash flow" and UCA cash flow and the role each plays in determining if a company meets the second necessary condition for business success.
- Identify non-financial red flags that apply to Total Coverage, Inc. and trace their likely impact on the company's performance, should they emerge.
- Assess the importance of an array of soft and hard data considerations and analysis in shaping the decision to further pursue a business relationship with Total Coverage, Inc.
Materials and Preparation for this Course:
- Credit Refresher on A Cash Flow Snapshot
- Credit Refresher on Non-Financial Red Flags
- Financial Statements for Total Coverage, Inc.
- Transcript for Follow-Up Call on Larry Crevin
- Exercise for the Session 4 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
Preparation
As preparation for the webinar session, please:
- Read the two Credit Refreshers.
- Read the written transcript for the follow-up call on Larry Creven.
- Complete as many of the steps in the exercise as time allows prior to the webinar.
Program level: Intermediate
Recommended CPE credits: 2.4
Recommended field of study:Specialized Knowledge
Advanced Preparation: Printing and reviewing course materials
Delivery Method: Group Internet Based
