This topic will explore all aspects of an income statement and Loss Statement and how the information that a profit and loss statement contains about a borrower’s operating performance can assist in making credit decisions. In particular, attention will be paid to those items that constitute cashflow in a profit and loss statement since those items determine repayment ability. The ways in which owners of businesses are compensated will also be examined as salaries are just one method of compensation. Ratios will also be used to determine the sales trends, profit margins, and efficiency that a businesses experiences and ways in which those can be affected.
This program is designed to assist bankers, lenders and credit professionals who want a fundamental understanding of the information that is contained in the income statement. During this program, participants will learn the critical elements of the profit and loss statement and how to use it to assess the operating performance of a business borrower.
- P&L’s key components—revenue, cost of goods sold, gross profit, operating expenses, profit before taxes, taxes, profit after taxes.
- Break-even analysis—how much revenue does a borrower need just to cover its expenses.
- Operating leverage—the smaller the gross profit, the more vulnerable a borrower’s profitability is to declining revenues.
- Production vs. productivity.
- Profit margins—gross profit margin, before-tax profit margin, after-tax profit margin.
- Analysis of return on sales, return on assets, return on equity.
- Profit vs cash flow—how to convert profit into cash flow.
- Case Study.
- Credit Analysts
- Credit Managers
- Loan review officers
- Work-out officers
- Commercial Lenders
- Credit Risk Managers
- Chief Credit Officers
- Senior Lenders
- Senior Lending Officers
- Bank Directors
- Chief Executive Officers
- Board Chairmen