商业银行管理Chap017.pptVIP

Analyzing Business Loan Applications (continued) Analysis of a Business Borrower’s Financial Statements Analyzing Business Loan Applications (continued) Analysis of a Business Borrower’s Financial Statements Financial Ratio Analysis of a Customer’s Financial Statements Information from balance sheets and income statements is typically supplemented by financial ratio analysis Critical areas of potential borrowers loan officers consider: Ability to control expenses Operating efficiency in using resources to generate sales Marketability of product line Coverage that earnings provide over financing cost Liquidity position, indicating the availability of ready cash Track record of profitability Financial leverage (or debt relative to equity capital) Contingent liabilities that may give rise to substantial claims in the future Financial Ratio Analysis of a Customer’s Financial Statements (continued) The Business Customer’s Control over Expenses A barometer of the quality of a firm’s management is how it controls its expenses and how well its earnings are likely to be protected and grow Selected financial ratios to monitor a firm’s expense control: Wages and salaries/Net sales Overhead expenses/Net sales Depreciation expenses/Net sales Interest expense on borrowed funds/Net sales Cost of goods sold/Net sales Selling, administrative, and other expenses/Net sales Taxes/Net sales Financial Ratio Analysis of a Customer’s Financial Statements (continued) Operating Efficiency: Measure of a Business Firm’s Performance Effectiveness It is also useful to look at a business customer’s operating efficiency How effectively are assets being utilized to generate sales and how efficiently are sales converted into cash? Important financial ratios here include: Annual cost of goods sold/Average inventory (or inventory turnover ratio) Net sales/Net fixed assets Net sales/Total assets Net sales/Accounts and notes receivable Financial Ratio Analysis of a Customer’s Financial Statements (cont