Politechnika Świętokrzyska
Wydział Zarządzania I Modelowania Komputerowego
Kierunek Ekonomia
Credit warthiness and metody of its appraisal
Przedmiot: Finance and banking
Przygotowali:
Gr. 303
Kielce 2013/2014
The objective of this audit was to bring the banks used by the methods of assessing the creditworthiness of companies. Presented the methodology and scope of analysis is in particular reference to the assessment of the applications of small and medium-sized companies seeking investment loans for the purchase of means of production (machinery, equipment, means of transport).
Credit — the ability of a private person or business entity to repay the loan with interest in the period between lender (Bank) and the borrower. The Bank prior to the conclusion of the credit agreement checks the creditworthiness of the operator. by querying the timeliness of settlements with suppliers and customers. Having credit is subject to credit.
The Act of 29 August 1997 — Right Bank defines credit rating as follows: by credit rating means the ability to repay the loan, plus interest within the time periods specified in the contract. Study credit is credit analysis.
The most important factors affecting creditworthiness include:
• the amount of the income by the person seeking a loan,
• and regularity
• current income and credit obligation,
• the nature and amount of the loan, loan term,
• type of rat (or descending),
• the amount a credit history of the borrower,
• age • the number of persons in the household,
• the height of the own contribution, additional security (e.g. another belonging to the borrower's property).
The aim is to obtain a credit rating information, the extent to which the current and projected financial situation of the borrower guarantees repayment of the loan together with interest due in the requested period. Banks assess the creditworthiness of the borrower both prior to the granting of credit as well as throughout the duration of the agreement, up to the total patches of loan with interest. The aim is to determine the degree of risk associated with the transaction and the amount of targeted reserves created by the bank to cover potential losses. Rating creditworthiness is a procedure largely structured. The methodology of this assessment is varied in individual banks develop it based on their own experience, using often also designs used in other banks, including foreign. Different is the scope of the required information and data, a variety of indicators, which use the individual banks in the analysis of creditworthiness, a variety of evaluation criteria are finally these indicators and weights assigned to them. However, you can highlight the common to most banks collection of the required information and documents, as well as acceptable methods of analysis of creditworthiness.
To a set of basic information and documents required by banks include:
• the documents to carry out business activities, specifying its legal status,
• a certificate SIGNED in to grant identification number of the statistical INFORMATION,
• the balance sheet, income statement and tax returns for the period from 1 to 3 previous years,
• current financial reporting shall be drawn up according to the requirements of the CSO, or information about the status of the property and the economic situation of the borrower.
• attestation of the IRS and social security about the settlement required do not processwith them in the past, issued by the tax office certificate of earned income,
• information about your bank accounts,
• information provided by the borrower guarantees and guarantees and commitments entered into by the borrower received loans and guarantees,
• the documents relating to the proposal for the legal security of credit
• description of the proposed project along with the feasibility study-an analysis of its feasibility,
• a forecast balance sheet, income statement and cash flow statement crediting period.
They complement the loan application that specifies the amount of credit, his destiny, the proposed terms of repayment and the proposed protection of its repayment. After verification of the application in terms of the formal and substantive, his acceptance, you are ready for a proper analysis of creditworthiness.
The first step is economic analysis, including the following:
1. Scope of the characteristics of the company.
2. Participating in the activities of the company:
• the human factor (head of enterprise, management, staff),
• measures (assets),
• financial resources, economic environment companies
• product
• marketplace
• field of action,
• economic prosperity and political.
Thanks to the economic analysis, you can see from the overall situation of the borrower.
The next stage of the analysis of creditworthiness is financial analysis, carried out on the basis of the financial statements (balance sheet, income statement). Covered by it are both historical data from previous years, as well as prognostic data. Scope of analysis is first and foremost a type of data that the bank has (undertakings generally prepare accounting simplified simplified balance sheets and accounts of the results) as well as the needs for which the analysis is being developed (type and loan volume, loan term).
As part of this analysis is comprised of the following steps:
1. the comparative analysis.
2. Structural Analysis.
3. analysis of cash flows (cash flow).
4. an indicative Analysis.
Comparative analysis of the financial statements is based on the comparison of selected items in the balance sheet and income statement in order to determine trends in their evolution in time. The basis of assessment are determined on the basis of these comparisons increases or decrease individual items both in absolute as well as relative terms. Comparison of the leg include annual reports or covering shorter periods of time (mainly quarterly), depending on the extent of the data provided by the borrower. The size of individual items in the report are compared with the corresponding headings of the earlier reports, which allows you to set trends. Each report can be compared so directly preceding them, allowing you to capture seasonal increases and declines in the selected position.
Analysis of the structure of the data is to determine and evaluate the participation of individual items in the components in the total in the report. In the case of balance sheet analysis of the study subject to the contribution of individual items of assets and liabilities in the total sum of the balance sheet. The evolution of the structure of assets is subject to, inter alia, the nature of the business, the technologies used and the company's development strategy adopted by the owners. The structure of liabilities is determined by the size of the borrower's equity and the size and nature of the capital raised. In the case of analysis of the results of the study are subject to the contribution of individual items in the report. The indicators obtained from the test to compare the values can be achieved by any other company with a similar profile or with the average results for the industry.
Analysis of the cash flow (cash flow) is assessing the financial position of the undertaking or investment project. In the first case, the test is based on an analysis of the sources of the creation and use of company funds and any amendments to them. The degree of detail of analysis depends on the needs of the specific case. For the purposes of this analysis, the banks require that cash flow statement was prepared for comparable reporting periods, usually annual or quarterly. In the second case, the test focused on an analysis of the sources of financing of the project and its cost effectiveness-stream obtained funds should cover current expenditure, capital repayments and interest payments on loans and investment expenditure.
Indicator analysis is the most important tool for evaluating the activities of the company. It involves the calculation of the relevant financial ratios, their shape and comparing them with the desired sizes, To carry out its full data are included in the balance sheet, income statement and cash flow statement. In banking practice for their calculation uses a special computer programs, which accelerates and facilitates the consideration of loan request. The most widely used include:
liquidity indicators
Liquidity analysis provides information about the solvency of the company or its ability to cover its financial obligations. Among the indicators of liquidity and of fundamental importance to the current ratio (current ratio) and the quick ratio (quick ratio).
debt and debt coverage ratios
They serve the analysis of sources of financing for companies and their structure, characterized by the degree of commitment of capital and foreign. Of fundamental importance are the General indicator here of debt, the participation rate of equity fund assets, the debt service coverage ratio, the debt service coverage ratio of cash flow.
indicators of profitability
The profitability indicators show the size obtained by the company in relation to the financial effects of the value of sales, committed assets and capital. The purpose of the profitability analysis is to measure the factors shaping its level, to determine the strength and direction of their influence on the level of profitability and to define the conditions and means of maximizing the profitability. The most commonly used indicators of profitability include return on sales (ROS), return on assets (ROA) and return on equity (ROE).
performance indicators.
Performance indicators are used to measure the activity of enterprises of financial resources of the company. Among them, the most commonly used are classified as receivables turnover ratio, inventory turnover, and turnover of assets.
Only for the few indicators it is possible to determine the intervals at which they should contain. In most cases, the only reliable form of analysis is to compare them to average values of the indicators for the industry. Comparative data must be up to date, because in the long term, the development of a specific indicator in the industry also changes. Acquisition and updating of such data on the basis of the statistical information gathered by the CSO is expensive, which is one of the reasons for which most banks includes such data as confidential. This does not mean, of course, that such data are completely unavailable. Information about the evolution of some of the above mentioned, as well as a number of other indicators for the sectors covered by the groups of the EKD, can be found in published by the Foundation for education and research "analysis or notebooks Bank in CSO Statistical Bulletin. Included are also methodological guidance on the rules for calculating individual indicators.
Bibliografia: