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FINANCIAL MARKET COURSES

Credit Analysis

Courses In This Course

The global financial crisis highlighted many issues, not least of which was some extraordinary mismanagement of credit risk. Post-crisis reviews pointed to a major breakdown in loan underwriting standards and indicated that far too much lending prior to the crisis was either irresponsible or not very prudent. As events proved, banks and other financial institutions can lose billions, or even go out of business, due to their failure to manage credit risk properly.

 

This course, Credit Analysis, is part of a series of courses that are designed for financial market professionals looking to better understand and manage credit risk in a post-crisis world. Rather than focusing on how to perform credit analysis, the series adopts a “top-down” view of credit risk and its management, covering many areas that are not currently well articulated. While financial analysis has a role, well-trained bankers need to understand much more than financial statements and ratios in order to determine the ability of borrowers and counterparties to repay their obligations.

Learner Profile

This series of courses is aimed primarily at those working in a commercial/wholesale credit environment where risk assessment and credit approval is based on objective and subjective analysis and experience. However, much of the material is sufficiently generic to be relevant to retail/consumer/SME banking institutions as well.

  •    CREDIT ANALYSIS - AN INTRODUCTION

    Overview

    This course introduces the concept of credit analysis and sets out the details of a structured approach that will help credit analysts and other interest parties to extract meaningful information from the key sources of financial data and information – the balance sheet, the income statement, and the statement of cash flows.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Risk – An Introduction

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  •    CREDIT ANALYSIS - BALANCE SHEET ANALYSIS

    Overview

    This course describes balance sheet structures in detail and provides an introduction to the key measures – such as the debt/equity ratio and various liquidity ratios – that can be derived from balance sheet values. Further commentary on other aspects of balance sheet accounting, such as consolidated accounts and off-balance sheet items, is also provided.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Analysis – An Introduction

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  •    CREDIT ANALYSIS - INCOME STATEMENT

       ANALYSIS

    Overview

    This course describes in detail the structure and elements of an income statement and introduces various income/profit measures, such as gross and net income/profit, and profitability ratios, such as gross and net margins, that can be derived from income statement values. The course also covers measures such as earnings per share, dividend payout ratios, and dividend cover. A good understanding of all these measures, and related accounting policies and practices, will help credit analysts and others to understand a company’s profitability/earnings, as well as the key drivers and sustainability of this profitability/earnings.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Analysis – Balance Sheet Analysis

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  •    CREDIT ANALYSIS - CASH FLOW ANALYSIS

    Overview

    This course looks at the statement of cash flows, and describes the cash conversion cycle and its impact on working capital ratios. Working capital days measures are also covered, including the use of such measures to identify the drivers of cash flow from operations. Other measures, such as EBITDA, are also explained, along with balance sheet structural elements – such as overleverage – that can have adverse cash flow implications. Finally, the topic of cash flow forecasting and associated stress testing are also introduced.

     

    A good understanding of these measures, and accounting policies and practices to look out for, will help credit analysts and others to understand the key drivers of a company’s cash flow.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Credit Analysis – Income Statement Analysis

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  •    CREDIT ANALYSIS - PERFORMANCE & OTHER

       MEASURES

    Overview

    This course looks at how information from financial statements can be used to calculate key financial ratios such as return on equity. It also explains other ratios that can be calculated using information from other sources such as share prices.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Analysis – An Introduction

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  •    CREDIT ANALYSIS – FORECASTING

    Overview

    This course looks at the importance of financial forecasting in overcoming the backward-looking nature of audited financial statements. The course also highlights the need for clear assumptions when forecasting, the role of stress testing, and the common pitfalls that analysts need to watch out for when building their forecasts.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Credit Analysis – Performance & Other Measures

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  •    CREDIT ANALYSIS – OTHER FACTORS

    Overview

    This course looks at how a business entity’s structure, business model, and the industry in which it operates affect the size and complexity of the entity and its financial statements. The course also looks at how analysts approach the financial statements of holding companies, banks, and insurance companies.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Analysis – Forecasting

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  •    SCENARIO – PERFORMING A CREDIT ANALYSIS

    Overview

    Credit analysts use a variety of techniques to gauge the strengths and weakness of a business. This scenario describes the most commonly employed techniques as used by credit analysts when assessing the financial health of a corporate customer. The scenario shows how analysts apply different financial measures and ratios to a company’s historical and forecast financial statements. It also demonstrates how analysts employ stress testing and scenario analysis to estimate company performance under different stress scenarios.

    Course Duration

    60 mins

    Prerequisite Knowledge

    A good understanding of financial statements and the techniques of credit analysis is required.

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