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.
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. Understanding Financial Statements and Business Organizations
... 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.
2. Personal Qualities and Competitive Advantages
... 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.
3. Critical Ratios and The First Necessary Condition for Business 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.
4. Non-Financial Red Flags, Cash Flow and Second Necessary Condition for Business Success
... 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.