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Commercial Credit Analysis Certification Program
Gary Deutsch

Credit analysis is the process of identifying and evaluating a borrower’s ability to repay a specific extension of credit while following prudent lending practices that comply with safety and soundness standards. Make sure your institution’s actions consistently demonstrate your adherence to safe and sound credit analysis.

Price: $1,495.00

Venue

This is a virtual event, accessible online and over the phone. Access instructions will be provided after registration.
Commercial Credit Analysis Cert

The Commercial Credit Analysis Certification Program consists of eight (8) sessions offered as live webinars via digital download (DL) format; and updated as needed to reflect changes in prudent banking practices, regulations and market conditions.

WHAT YOU'LL LEARN

The certification sessions offer a clear, concise and comprehensive program to equip each participant with an understanding of how effective credit analysis can be undertaken, presented, and prepared.

Session One: “The Credit Analysis Process: Back to Basics”

Session one provides a clear understanding of how underlying concepts of credit underwriting and the fundamentals of the differences that must be addressed between loans as well as how to be a “loan detective.” This discussion of the credit analysis process will cover the following topics:

  • The keys to superior credit analysis
  • The five Cs of credit
  • Knowing the borrower
  • Types of borrowing entities
  • The analyst’s tool kit
  • Other information sources supplied by applicants
  • Information supplied by third parties
  • Background and comparative information

Session Two: “Five Cs of Credit – A Deeper Dive”

This session takes a more detailed look into the five Cs of commercial credit which form the basis for rational commercial lending. Most people involved in the lending or credit evaluation process are generally familiar with the Five Cs of Credit – Character, Capacity, Capital, Conditions, and Collateral. In this session, our instructor will build on these basic understandings and help the analyst build an effective framework to ensure that they have considered every important aspect of those five Cs in determining credit risk. In this informative session, we will cover:

  • The components of character and how to assess a borrower’s character
  • The meaning and importance of capacity and financial tools used to evaluate capacity
  • The meaning and importance of capital and how to assess the capital adequacy of businesses and individuals
  • The meaning and importance of conditions and how to assess conditions in lending, including international lending
  • An overview of collateral and how to assess collateral coverage

Session Three: “Analyzing Financial Statements: Back to Basics”

Session 3 enables the participant to develop a greater understanding of the analysis of financial statements and evaluate the efficacy and reliability of the various types and quality of the various financial reports of assets, liabilities, capital, income and expenses. But all of these reports are not created equal and analyzing these reports also requires making judgments on the reliability of the information presented. The potential for manipulations, or intentional misrepresentation in these reports. The discussion will cover the following topics:

  • Types of financial statements
  • Elements of the annual financial report
  • Methods of accounting
  • Misrepresentation in financial statements
  • Regulatory environment
  • Red flags indicating problems in financial reports
  • Other, non-annual financial statements

Session Four: “The Balance Sheet – Back to Basics”

Session 4 provides a thorough understanding of the balance sheet which is one of the four major financial statements in an annual financial report. As a fundamental report to corporate credit analysis, the balance sheet describes the financial condition or position of an organization at a point in time. Credit analysts use the balance sheet to measure liquidity and leverage to determine if an organization can cover its obligations to creditors. In this informative session, we will cover:

  • Balance Sheet Basics
    • Current Assets
    • Cash and Equivalents
    • Marketable Securities
    • Accounts Receivable
    • Inventory
    • Spreading Inventory
    • Other Current Assets
  • Property, Plant and Equipment and Other Assets
    • Property, Plant and Equipment
    • Depreciation
    • Leasing Long-term Assets
    • Valuation Issues
    • Other Assets
    • Amortization
    • Market vs. Book Value
  • Liabilities in General
    • Current Liabilities
    • Notes Payable/Short-term Debt/Lines of Credit
    • Notes Payable — Trade
    • Accounts Payable — Trade
    • Other Current Liabilities
    • Long-term Liabilities
    • Long-term Debt
    • Deferred Expenses — Deferred Income Taxes
    • Deferred Expenses — Deferred Income
  • Owner Equity
    • Contributed and Earned Equity
    • Common Stock
    • Preferred Stock
    • Paid-in Capital
    • Treasury Stock
    • Earned Equity — Retained Earnings
  • Business Valuation
    • Business Valuation in General
    • Methods for Business Valuation — Asset-Based Approaches
    • Methods for Business Valuation — Comparative Approaches
    • Methods for Business Valuation — Earnings or Cash Flow Approaches
    • Methods for Business Valuation — Market Approaches
    • Methods for Business Valuation — Other Approaches and Considerations
    • Additional Issues in Business Valuation
    • Business Valuation Data Sources

Session Five: “The Income and Equity Statements – Back to Basics”

Session 5 addresses the income statement and the owner’s equity statement, two of the four reports that make up a borrower’s annual financial report. In this back-to-basics discussion, we identify the type of information listed on the income statement and explain how to spread income statement information. We also identify the type of information that appears in the equity statement. In this informative session, we will cover:

  • The Income Statement
    • Elements of an Income Statement
      • Sales or Revenues
      • Gross Sales
      • Less Returns/Allowances and Discounts
      • Spreading Sales and Returns, Allowances, and Discounts
    • Cost of Goods Sold
      • Cost of Inventory Sold
      • Other Costs
    • Operating Expenses
      • Small vs. Large Firms
      • Spreading Operating Expenses
    • Non-Operating Items
      • Unusual Non-Recurring Charges
  • The Equity Statement
    • Components of the Equity Statement
      • Not-For-Profit Entities vs. Larger Companies
    • Benefits of an Equity Statement

Session Six: “The Cash Flow Statement – Back to Basics”

The cash flow statement is a report of results on a cash basis. It is arguably the most important statement, although it is not prepared as frequently as the balance sheet or income statement. The cash flow statement, as the primary cash reporting tool, is a good starting point for cash flow analysis during the lending process. Its primary purpose is to measure changes in cash and cash equivalents from one balance sheet date to the next. This session discusses how credit analysts can use a prospective borrower’s cash flow statement to assess loan risk and assist with the lending decision-making process. In this informative session, we will cover:

  • The GAAP Cash Flow Statement
    • Operating Activity Cash Flows
    • Investing Activity Cash Flows
    • Financing Activity Cash Flows
  • Calculating and Analyzing Cash Flows
    • Potential Errors with Accounts Receivable and Non-Cash Expenses
    • Other Potential Problems in Calculating and Analyzing Cash Flows
    • Assessing the Quantity of Cash Flows
    • Assessing the Quality of Cash Flows
  • Additional Cash Flow Statement Analysis
    • Alternate Cash Flow Statements — Sources and Uses Approach
    • Alternate Cash Flow Statements — Checkbook Approach
    • Alternate Cash Flow Statements — Income Statement Spread Approach
    • Potential Cash Flow Statement Warning Signals
  • The Seven Cash Flow Drivers
    • The Cash Flow Statement and Ratio Analysis
    • Free Cash Flow — a Popular but Inconsistently Defined Term
    • The Cash Flow Statement vs. the Concept of EBITDA

Session Seven: “Financial Ratio Analysis Process – Back to Basics”

Although credit analysts should have a basic sense of how to read financial statements, it is also important to apply analysis tools to the data to gain a better understanding of a borrower’s financial position and performance. Financial ratios can significantly improve an analyst’s ability to see an applicant’s total financial picture. This session will discuss the essential components of the financial ratio analysis process to benefit both new and seasoned analysts. The discussion of the financial ratio analysis process will cover the following topics:

  • Considerations in using financial ratios
  • Keeping ratio analysis in perspective
  • Liquidity ratios including primary, secondary and liquidity trends
  • Leverage/coverage ratios including primary, secondary, likelihood of bankruptcy, and leverage and debt coverage trends
  • Performance ratios including primary, secondary, and profitability trends
  • Efficiency ratios including primary, secondary, and efficiency/activity trends
  • Other analysis tools including such tool as cash flow ratios and ratios for analyzing individuals

Session Eight: “Analyzing the Creditworthiness of Individuals – Back to Basics”

To evaluate the creditworthiness of individuals, credit analysts may use any of several primary sources of information, depending on the amount of credit sought and whether a consumer or commercial transaction is involved. In the commercial credit context, personal financial statements, income tax returns, and credit agency reports each have a role. This session will discuss loan applications, income tax returns and credit reports, but will focus on personal financial statements, since bankers intuitively look to this source of information first and foremost in establishing financial capacity. The discussion of the individual creditworthiness will cover the following topics:

  • Uses of a personal financial statement based on information in statements, reliability of information, and lender liability warnings
  • Standards for preparing personal financial statements
  • Assets including cash, investments accounts, notes, contracts receivable, cash surrender value of life insurance, real estate, motor vehicles, personal property, and other assets
  • Liabilities including loans, notes, and contracts payable
  • Net worth including discretionary adjustments, statement of changes, income and expense, contingent liabilities, life insurance, and protection from false information
  • Changes in circumstances
  • Income tax returns
Price: $1,495.00

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PRESENTER

Gary Deutsch

WHAT'S INCLUDED

  • Access your training anywhere, with a computer, tablet or smartphone.
  • Engaging and up-to-date training to support your career and your organization.
  • Handouts you can distribute to your board and staff.