CFI CBCA Financial Analysis for Credit Latest

CFI CBCA Financial Analysis for Credit Latest Update -160 Questions with 100% Verified Correct Answers Guaranteed A+ Verified by Professor

-EBIT is a common metric in valuation work and serves as an important part of the free cash flow to equity equation.-EBIT may be less of a focus for many credit professionals because - CORRECT

ANSWER: it fails to capture some important non-cash items.

A credit analyst generally can't derive a risk rating based on a projection model due to heavy regulations.Financial Institutions: - CORRECT ANSWER: Subject to heavy regulatory scrutiny Regulators frequently audit a firm's commercial loan book Projection models require a lot of assumptions, making standardization difficult

Take the borrower's most recent fiscal year-end and overlay those results with any proposed new debt.

A credit professional may conduct the analysis using - CORRECT ANSWER: actual

current/historical results, as well as using projected operating results.

A retractable preferred share - CORRECT ANSWER: is a preferred share that can be repaid at a specified price at a maturity date.

Acceptable - CORRECT ANSWER: 1:1, 2:1

Additional Credit Metrics 1 / 3

Loan Amortization - CORRECT ANSWER: Commercial Mid-Market

Smaller Mid-Market

Analyzing credit means - CORRECT ANSWER: identifying risk to repayment capacity.Falling behind industry trends can be indicative of a company in decline

Are margins rising or falling? - CORRECT ANSWER: Are margins being impacted by

direct costs or changes in quantity sold?

As a commercial banker or credit analyst trying to win new business from a competitor, - CORRECT ANSWER: the client's interest rate or spread are usually outlined in the notes to their financial statements.

Asset Turnover Ratio - CORRECT ANSWER: = Net Sales / Total (or net) Assets

Indicates how many dollars of revenue are generated for every dollar of assets.

Benchmarking - CORRECT ANSWER: To make ratio analysis more insightful, we need

to compare the company to its industry peer group.

Benefits of Horizontal Analysis Horizontal analysis allows us to answer questions such as: - CORRECT ANSWER: -Are margins rising or falling?-Is performance improving or declining?-What is causing margins to rise or fall?

-Elevator analysis is not useful on its own.-Use trend analysis to pinpoint areas for further investigation.

Breakdown of income statement - CORRECT ANSWER: Sales Revenue 2 / 3

Direct Costs Gross Profit Research & Development Marketing Sales Depreciation & Amortization General & Administration Income from Ops.Interest Inc./Exp.Taxes Net Income

Breaking down the income statement - CORRECT ANSWER: Sales Revenue

Cost of Good Sold Gross Profit Indirect Costs Research & Development Marketing & Sales

Business Ownership Planning - CORRECT ANSWER: • Intergenerational succession

planning

By analyzing historical trends, we are better able to - CORRECT ANSWER: project

future performance and solvency.

Commercial Bank - CORRECT ANSWER: Funding derived from client deposits into

checking accounts Can borrow from central and other banks

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