Credit Analysis - Level 2

Course level

Intermediate

Delegates

This course will be of benefit to those with 1-2 years’ experience of credit analysis. A familiarity with financial statements is assumed. It is also suitable for investment analysts who wish to understand a company's financial standing from a credit perspective. Those who have attended our Credit Analysis Level 1 course will be well prepared for this course.

Overview

This intermediate level five-day course develops a more detailed understanding of the components of the financial statements and the operating dynamics of companies. We do not recommend that you attend Credit Analysis Level 2 immediately after having attended Credit Analysis Level 1. An interval of a few months between the two courses will give you valuable time to put into practice all the skills you learned at Level 1.

Learning outcomes include obtaining a greater understanding of:

• Framework for Credit Analysis
• Components of credit analysis: assessment of management, analysis of company's ability to repay and protection for the lender; collateral and covenants
• Risks to the Business
  • Macro factors: political, economic, environmental and demographic
  • Industry factors, e.g.: Growth trends, exposure to economic cycles, barriers to entry and regulation
  • Corporate specific risks, e.g.: Product/geographic diversification, support levels, strength of major customers and suppliers
• Tools for Evaluating Corporate Strategy
  • PEST Analysis
  • Product mission matrix
  • Market life cycle
  • Product portfolio matrix
  • Porter's model of competition
  • SWOT analysis
• Analysis of the Financial Statements
  • Accounting principles
  • Overview of main differences between UK GAAP and IFRS
  • Critical areas for review in the financial information
  • Review of balance sheet and profit and loss account
  • Off-balance sheet items
  • Adjusting the accounts for analytical purposes
  • Areas of flexibility in accounts, e.g.: Off-balance sheet financing, stock values, capitalisation of expenses and revenue recognition
• Understanding the Business
  • Interpretation through ratio analysis
  • Liquidity and the cash cycle
  • Working investment as a measure of liquidity
  • Identifying company dynamics
• The Dynamics of Cash Flow
  • Construction and format of cash flow statements
  • Understanding and interpretation of cash flows
  • Calculation of free cash flow
  • Debt capacity·Budgeting and Forecasting
  • Uses as a management tool
  • Forecasting key assumptions
  • Projection of the balance sheet and profit and loss account
  • Forecasting cash flow
  • Sensitivity analysis
• Corporate Failure
  • Identifying warning signs
  • Reasons for corporate failure
  • The critical role of management
• Collateral Supporting the Debt
  • Why take collateral?
  • Priority of creditors' claims
  • Insolvency law and how it affects lenders' rights
• Covenants to Protect the Lender
  • Affirmative/negative covenants
  • Financial covenants
• Structural subordination

Course Dates