Financial Analysis for Credit Risk Determination


Overview/Description
Target Audience
Prerequisites
Expected Duration
Lesson Objectives
Course Number


Overview/Description
Making credit decisions requires both quantitative and qualitative analysis. A diligent credit analysis coupled with strong credit policies will typically reduce a financial company's credit risk. Quantitative analysis includes financial statement analysis (FSA). Banks and other financial institutions use FSA techniques frequently in performing their credit decisions. FSA is used to determine the financial state of a company and how it compares to its peers. It consists of techniques that include financial ratios and cash flow analysis. Key financial ratios are used to assess the company's profitability, ability to pay back interest and debt, and the levels of leverage that the company deploys. In the context of credit, the cash flow analysis provides information on whether the company can generate enough funds to increase their debt load. This course gives a brief overview of the structure of a company's financial statements, including the income statement, balance sheet, and cash flow statement. The course introduces financial statement analysis and some of its components, such as ratio analysis and cash flow analysis. Ratio analysis includes financial ratios that are indicative of the company's liquidity, solvency, profitability, and efficiency, and how these ratios are analyzed both historically and also compared to the company's peers. The course also covers two different methods of calculating the company's free cash flows, an important indicator determining whether the company can add to its debt load.

Target Audience
Financial services professionals, consultants, and sales professionals interested in providing or selling products and services to banks, investment companies, and other financial corporations, and everyone interested in different types of credit risk analyses

Prerequisites
None

Expected Duration (hours)
1.0

Lesson Objectives

Financial Analysis for Credit Risk Determination

  • describe the relationship between financial statements and analysis
  • describe the three main financial statements
  • describe the main financial statements and their relationship to analysis
  • describe the key ratios and metrics to assess company credit risk
  • identify the benefits of financial ratio analysis
  • describe the basic ratios, metrics, and benefits of financial analysis
  • describe the key information obtained after completing an analysis of cash flows
  • identify the two main ways to calculate free cash flow
  • describe free cash flows and identify how to calculate them
  • Course Number:
    fini_10_a02_bs_enus