We are going to finish this module with a Case Study in which we will try to examine most of the non-financial and financial factors affecting an individual business and how we may come to a considered opinion on the level of risk involved for a bank lending to that business.
Who is the debtor? This may seem an obvious, and perhaps irrelevant question, but the lending banker must be fully aware of the person or entity to which he is providing credit, and who, or what entity, will have a legal obligation to repay the loan.
There are 2 methods generally used for Cash Flow Analysis: — Direct method; — Indirect method.
The uppermost goal of the Cash Flow Analysis is: — Identification of the main sources of cash gains for a given accounting period;
The three most important financial indicators for any company’s operations are: — Sales revenue — Net Income — Cash Flows
Assets Utilization The return on total assets depends on (1) getting the largest profit out of each dollar of sales and (2) obtaining the highest possible amount of sales per dollar of invested capital (net assets).
There are many criteria by which the company’s performance can be measured: — Net Sales; — Net Income; — Output; — Added Value.
There are a number of key elements involved in the evaluation of the long-term solvency of an enterprise. The analysis of capital structure is concerned with the types of capital funds used to finance the enterprise, ranging from «patient» and permanent equity capital to short-term funds that are a temporary, and, consequently, a much more […]
The short-term liquidity of an enterprise is measured by the degree to which it can meet its short-term obligations.
The Profit and Loss Statement represents in summarized fashion the results of operations, investment, and financial activities of an enterprise. In almost all other aspects of financial analysis, the evaluation and projection of operating results assume great importance.
