To properly assess the risk of repayment, we need understand how the business has performed over the past several periods; this is called trending. The data needed for this process is several years of financial statements, also known as the borrower’s story about how they have managed their business activities. We do financial analysis to determine the questions about “what” has changed so we can determine the “why” the number changed. The explanation of the “why” is called risk identification, and is the first step in making a reasoned credit decision.
• Discuss role of accounting in development of financial statements
• Review financial statement construction
• Present Financial Statement Analysis Process
• Discuss calculation and role of ratios in financial analysis
• Be aware of difference between “accounting” for accountants and bankers
• Better understand impact of financial statements on ratio calculation
• Learn to better understand the borrower’s story about business activity
• Provide tool to ask more thorough questions about business activity
• Enhance communications of risk issues in credit memos
LexisNexis is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417. Web site: www.nasba.org.