TOOL 5.4
Key Questions
- Whose numbers am I analysing? (Relate back to Credit Base)
- Consolidated/Unconsolidated?
- Audited/Unaudited? Unqualified/Qualified? Pro-forma
- What are the key accounting policies?
- At what date and for what period are the numbers?
- What were the key events during the period and after the FYE?
- Is there any evidence of creative accounting?
- Projections – how reliable are they?
| Is this issue a risk? | Is this risk mitigated? | Is it a natural mitigant for another risk? | ||
| Profitability | Margins – Gross / EBIT(DA) Asset Utilisation – Net Operating Cycle – Fixed Asset capacity utilisation / efficiency (industry specific) – Return and income from financial FA’s Labour Efficiency – Interest Coverage | |||
| Liquidity / Cash flow | The impact on Debt Service Capacity of: – Gross operating cash flow – Net working capital requirement – Financing costs – interest, current portion of long term debt, dividends – Capital expenditure – mandatory or non-mandatory | |||
| Solvency | Leverage / Gearing – Permanence of Capital Structure – Quality of Assets (Cash generation/ Marketability/ Concentration) – Stability of Liabilities (Debt maturity profile/ Ability to refinance STD/ Concentration) – Matching (Currency Exposure/Interest Rates/ Funding vs Asset Profile) – Off Balance Sheet Items (Contingent Liabilities/ Guarantees/ Options/ Open LCs/ Litigation/ Commitments/ Non- discretionary capex/ Operating leases/ Post FYE events/ Special Lending Structures/ Derivatives) |
