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Questions and Answers
Which of the following is NOT one of the key factors that a credit analyst needs to evaluate when assessing a borrower's capacity?
The statement of cash flows is used to identify the company's:
Which of the following is NOT a key component of the cash flow statement?
Which of the following is a key factor that a credit analyst should consider when evaluating a company's capacity to service and repay debt?
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Which of the following is NOT a key component of the Corporate Finance Institute's capacity assessment framework?
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Which of the following is the LEAST important factor for a credit analyst to consider when assessing a borrower's capacity?
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Which of the following is the MOST important factor for a credit analyst to consider when assessing a borrower's capacity?
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Which of the following is NOT a key component of the Corporate Finance Institute's capacity assessment framework?
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Which of the following is the LEAST relevant factor for a credit analyst to consider when assessing a borrower's capacity?
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Which of the following is the MOST important component of the Corporate Finance Institute's capacity assessment framework?
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Study Notes
Porter's 6 Forces
- Evaluate industry dynamics and attractiveness by analyzing:
- Threat of potential entrants
- Power of complementary good/service providers
- Bargaining power of buyers
- Intensity of industry rivalry
- Threat of substitute goods/services
- Bargaining power of suppliers
PEST Analysis
- Assess the general business environment by examining:
- Political factors
- Environmental factors
- Legal factors
- Economic factors
- Technological factors
- Social factors
Corporate Finance Institute (CFI)
- Assessing industry dynamics and attractiveness using Porter's 6 Forces
- Conducting PEST analysis to assess the general business environment
- Analyzing company's competitive position and risk management
SWOT Analysis
- Evaluate internal factors:
- Strengths
- Weaknesses
- Evaluate external factors:
- Opportunities
- Threats
Loan Contract and Requirements
- Key components of a loan contract:
- Conditions – guidelines and obligations
- Purpose
- Amount
- Specific loan conditions
- Term
- Pricing
- Covenants
- Importance of understanding loan conditions to assess risk
Character Overview
- Evaluate a company's character by:
- Assessing its history and operations
- Assessing the management team
Assessing the Company
- Evaluate company history:
- Length of existence
- Track record
- Customer base
- Growth (organic and through acquisitions)
- Evaluate current operations:
- Understanding of business operations
- People, process, and information systems
- Evaluate future operations:
- Growth plans (organic, mergers, acquisitions, new markets, new products)
- Extension of existing or new products and services
Assessing the Management Team
- Evaluate management team's:
- Past performance
- Reputation
- Planning experience
- Business and financial acumen
- Attitude towards risk
- Skills in:
- Planning
- Organizing
- Leading
- Controlling
- Communication
- Financial reporting
- Measurement
- Financial compliance
- Competency
- Performance reporting
Capacity Overview
- Evaluate a company's capacity to service and repay debt by:
- Analyzing current and forecasted operating cash flow generation
- Evaluating cash tied up in working capital
- Assessing sustainable forecasted cash flow to service debt obligations
Analyzing the Cash Flow Statement
- Use the cash flow statement to identify sources and uses of funds
- Evaluate operating, investing, and financing activities
- Analyze drivers of sustainable profitability and growth
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Description
Test your knowledge on assessing industry dynamics, attractiveness, and conducting a PEST analysis. Explore topics like Porter's 6 Forces, threat of potential entrants, bargaining power of buyers, industry rivalry, and more.
