Profitability and Cash Flow

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Profitability and Cash Flow
what you see may not be what you get

Target Audience

This course is for all analysts and lenders who require advanced credit analysis tool and techniques in assessing risk and establishing loan structure.

6 CEUs

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Course Objectives:

	Understand the purpose and implications of distributions, loans to shareholder, and one-time events in adjusting reported net income, primarily for non-Subchapter C corporations, to arrive at an estimate of actual business income for a company;
	Understand the importance of a) determining it distributions and loans to shareholders exceed the implied personal income tax obligation on company profit for non-Subchapter C corporations and b) the follow-on implications for actual operating expenses, EBITDA, and EBITDA %;
	Understand the critical differences between the FASB 95 statement of cash flows and the Uniform Credit Analysis (UCA) cash flow statement and the adjustments necessary to transform Net Cash Provided by Operating Activities from a FASB 95 statement of cash flows to Net Cash Income on the UCA cash flow statement;
	Explore the construction, use, and application of the UCA cash flow statement in identifying borrowing causes, related party transactions, financing requirements, and financing sources in assessing risk;
	Using specific measures for profitability and cash flow from business operations, establish a company's position on the Risk Grid and track shifts in its risk profile from period to period between the prosperity, operational illness, strategic illness, and terminal illness quadrants; and
	Examine possible loan covenants that, if honored, would assure a borrower's revenue would exceed all expenses after adjustments for one-time events, distributions, and loans to shareholders.

Course Materials

	Note on Key Ratios and Risk Assessment
	Note on Cash Flow Formats and Risk Assessment
	Note on Constructing and Using Cash Flow Statements in Assessing Risk
	1999 Financial Statements for Benson Manufacturing, Inc.
	Loan Officer Summary for Benson Manufacturing, Inc.
	Loan Officer Memorandum for Benson Manufacturing, Inc.
	1999 Financial Statements for Sandover Contractors, Inc.
	Loan Officer Summary for Sandover Contractors, Inc.
	Loan Officer Memorandum for Sandover Contractors, Inc.
	Exercise Set (downloaded from Shockproof! Training website)
	Online Review Quizzes
	Solution Set (downloaded from Shockproof! Training website)
	Access to the Shockproof! Training Resource Center
	Inclusion in the Shockproof! Training Discussion Forum
	Online Credit Skills Proficiency Exam

Upon Completion

Participants who successfully complete the workshop will be able to:

	Make the necessary adjustments to EBITDA, or the Cushion, should distributions and withdrawals exceed the implied personal income tax obligation on company profit;
	Make the necessary adjustments to reported net income for distributions and withdrawals, gains or losses on sale of assets, and other one-time, non-recurring events to arrive at actual net profit;
	Make the necessary adjustments to Net Cash Provided by Operating Activities from the FASB 95 statement of cash flows to transform that amount to Net Cash Income on the Uniform Credit Analysis (UCA) cash flow statement;
	Understand the use and limitations of both the FASB 95 statement of cash flows and the UCA cash flow statement in assessing borrower risk;
	Properly construct, use and apply the UCA cash flow statement in identifying the source of cash to pay interest expense and repay debt as scheduled, along with determining selected borrowing causes, the financing requirement and the external sources of cash to meet the financing requirement; and
	Structure and apply a loan covenant that will assure actual bottom line profit for non-Subchapter C corporations, if honored.

How to Order

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Level I
111		The Language of Business
121		Differences in Business Organizations
131		Financial Statement Quality

Level II
211		Business Cash Flow Statements
221		Personal Financial Statements
231		The Personal Cash Flow Statement

Level III
311		Financial and Non-Financial Red Flags
321		Profitability and Cash Flow
331		Sales Growth and Borrowing Causes
341		Operating Profit and Debt Capacity
351		Management Assessment and the Credit Decision