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Coporate Finance

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If you were a commercial credit analyst charged with the responsibility of making an accept/reject decision on a company’s loan request, with which financial statement would you be most concerned? Which financial statement is most likely to provide pertinent information about a company’s ability to repay its debt?
A commercial analyst researches costs, expenditures, and sales at a company to determine how to improve the organization's financial standing. He or she helps set financial goals for a business, analyze problems, and initiate new policies in different divisions. The primary responsibility of a commercial analyst is to scrutinize sales figures for different product lines. An analyst reviews records from previous years and quarters and compares them to current figures.
Financial Statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance and liquidity of a company. Financial Statements reflect the financial effects of business transactions and events on the entity. Balance sheet, income statement, statement of cash flows, retained earnings is four main types of financial statements. An analyst looking at granting a loan request would be most interested in the company’s balance sheet, which she could use to compute liquidity ratios (current and quick ratios) and debt ratios. Debt ratios measure the ability of a company to meet its financial obligations when they fall due. Financial leverage ratios (debt ratios) indicate the ability of a company to repay principal amount of its debts, pay interest on its borrowings, and to meet its other financial obligations. They also give insights into the mix of equity and debt a company is using. A credit analyst would also want an income statement with EBIT and interest with which to compute times interest earned. Times

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