DOCSLIB.ORG

Welcome to the Credit Analyst Development Program

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Welcome to the Credit Analyst Development Program WELCOME TO THE CREDIT ANALYSTDEVELOPMENT PROGRAM Credit Analysts arean integral partof Credit Administration in the BankingIndustry. The analyst's role is to analyze and summarizethe financialcondition of an entityto determine the debt repayment capability of the entity. In doing so, the analystconsiders bothfinancial and non-financialfactors that may impact the ability to repay. Being a Credit Analyst is a universally recognized and valuable skill to possess in the banking industrya nd could lead to managementpositions if performed effectively. It is a great skill for those who choose to become a commercial / consumer lender or choose to become a career Credit Analyst. Whatk ey personal characteristics do good Credit Analysts possess? Below is a list of characteristicsI have witnessed in effective Credit Analysts: ► SharpEye for Details ► VeryAnalytical ► CuriousI Inquisitive ► Good Communicator ► Assertive ► Researcher ► People Skills ► Thick Skin ► Willing to Learn There are professional skills good Credit Analysts should possess also. According to an article presented in a Risk Management Association Journal of Commercial Lending on the skills of "Top-Notch" Credit Analysts, they: ► Are Well Versed in the Details of Accounting ► Keep up withChanges in Accounting Practices ► Are Competent Writers andCommunicators ► Continue Their Self-Educationas OpportunitiesPresent Themselves ► Like Having Control Over All of Their Analysis Being well versed in the details of Accounting is a major requirement for Credit Analysts to achieve. Accounting is a highly technical andvast fieldof study and, the cornerstonefor analyzing financialstatements and taxreturns. BANKERS INSIGHT GROUP, LLC 1 Improved analytical skills starts with having a good working knowledge of accounting. Once you understand how financial statements are constructed, it makes it easier for you to analyze and understand the results. After all, would you consider taking your car in for repairs to an auto mechanic who tells you, "I would love to fix your car, but I don't know how the engine works .... " How can you analyze financial statements and tax returns if you do not know how they are constructed? ACCOUNTING DEFINED Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information. It is the "language" employed to communicate financial information and is primarily concerned with the design of the system of records, the preparation of reports based on the recorded data, and the interpretation of the reports. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES {GAAP): GAAP is the rules financial accountants must follow when entering accounting transactions and preparing financial statements. Financial accountants cannot just throw numbers on the income statement, balance sheet, or statement of cash flows; Rather, a level playing field must exist between businesses so that the individuals reading the financial statements can compare one company to another. THE ACCOUNTING EQUATION Assets = Liabilities + Stockholders' Equity The Accounting Equation simply states that all assets on the balance sheet are supported by a combination of funds borrowed or owed to creditors plus the amount of funds invested into the entity by the owners. After each economic event is recorded into the records of an economic entity, the Accounting Equation must always balance after the transaction is documented. This will ensure that the Balance Sheet Assets will equal the Liabilities and Stockholders' Equity including the results of the Income Statement, which should be reflected in Retained Earnings. Bottom Line: "The equation must always be in balance". This Pre-Course Case Study will demonstrate how financial statements are constructed from journal entries into a full set of financial statements. To aid in the completion of this Case Study, BAN KERS iNSIGHT GROU P, LLC 2 the Rules of Debits and Credits shown below should be reviewed. These rules apply to all Economic Entities without any exceptions. After becoming familiar with the Rules of Debits and Credits Chart, please proceed to the Case Study and follow the instructions. RULES OF DEBITS AND CREDITS Assets = Liabilities + Stockholders' Equity Stockholders' Equity Asset Accounts Liabili Accounts Accounts Debit* Credit Debit Credit* Debit Credit* Debit for Credit for Debit for Credit for Debit for Credit for Increase Decrease Decrease Increase Decrease Increase Cost and Ex ense Accounts Revenue Accounts Debit* Credit Debit Credit* Debit for Credit for Debit for Credit for Increase Decrease Decrease Increase DEBITS CREDITS Increase assets Decrease assets Decrease liabilities Increase liabilities Decrease stockholders' equity Increase stockholders' equity Decrease revenues Increase revenues Increase expenses Decrease expenses Increase dividends Decrease dividends *Normal balance BANKERS INSIGHT GROUP, LLC 3 CASE STUDY These business transactions occurred recently for Bulldog-Tech Manufacturing, Inc. Please record each transaction utilizing the enclosed journal worksheets. The first journal worksheet contains accounts representing the asset section of the balance sheet while the second journal worksheet represents accounts found on the liabilities, capital and income statement portion of the balance sheet. As you read each transaction below, please record the financial event onto the worksheet insuring you are debiting and crediting the proper accounts. Please Note that you will not see every account on the journal worksheet. For example, you will not see an accounts for Interest or Rent Expense therefore, transactions involving these accounts should be placed in the Operating Expense column of the journal worksheet. As you enter transactions, indicate debits and credits utilizing either a plus or minus sign. Also, be mindful of the Accounting Equation (Assets = Liabilities + Net Worth), which means that each recorded transaction should result in this Equation remaining in balance. After all transactions are entered, total each column at the bottom of the worksheet journals for each account and transfer the the data into the 2019 column of the balance sheet and income statement for the company. Then, repeat entering the data into the 2019 column assuming the company utilizes a LIFO Inventory costing method. The goal of this case study is to demonstrate how financial statements are created and creating a balance sheet that balances (Remember: A = L + NW). Good Luck! A Purchased 400 units of inventory @ $90 each on account $36,000 B Made payment on Credit Line ($10,000 Prin. & $5,000 Int) $15,000 C Purchased 300 units of Inventory @ $95 each on account $28,500 D Sold 1,000 units @ $120 per unit on account. The Company utilizes the FIFO (First In First Out) inventory costing method $120,000 E Depreciation of Building, Machinery and Equipment $14,800 F Management established an Allowance for Doubtful Accounts $10,000 G Paid principal payment of Long Term Debt $5,833 H Received cash from customer's account $65,000 I Paid creditors for inventory purchased $23,000 J Paid license taxes in advance $4,800 K Incurred Rent Expense but did not pay it $3,330 L Charged off account due from ABC Company $5,000 M Sold equipment for $9,000 cash, which is $2,000 in excess of its book value, Accumulated Dep is $7,000 Calculate N Declared a Dividend but did not pay it $30,000 O Sold 1,000 shares of Common Stock at a price of $5 over the Stock's Par Value of $5 Calculate P Sold 500 units @ $120 per unit of which one-half was paid in Cash and the other half on account. FIFO Inventory is still being utilized $60,000 Q Paid one-half of the Dividend Declared $15,000 R Purchased three acres of land for $125,000 of which $10,000 in principal is due in one year and the balance over one year A Downpayment of $25,000 was required $125,000 What would be the impact upon the Income Statement and Balance Sheet if BullDog-Tech utilized a LIFO Inventory Costing Method? Prepare an undated Income Statement and Balance Sheet assuming a LIFO Inventory Costing Method is utilized and place the results on the attached financial statements on pages 8 & 9. 4 BULLDOG-TECH MANUFACTURING ASSETS Accounts (Allowance) Land & Machinery & Autos & Furniture & Accumul. Prepaid Cash Receivable For Doubt. Inventory Building Equipment Truck Fixtures Depreciatio Expenses BEG 100,000 32,000 85,600 550,000 275,500 7,500 5,000 10,000 1,065,600 A B C D E F G H I J K L M N O P - Q R END 5 BULLDOG-TECH MANUFACTURING LIABILITIES, CAPITAL & INCOME STATEMENT Accounts Notes Accrued Current Port Dividend Long-Term Revenue & Cost of Operating Payable Payable Expenses of Long T/D Payable Debt Capital Gains Goods Sold Expenses BEG 67,000 50,000 23,000 70,000 549,000 306,600 1,065,600 A B C D E F G H I J K L M N O P Q R END 6 Bulldog-Tech Manufacturing, Inc. Balance Sheet As of December 31 ASSETS 2018 % 2019 CURRENT ASSETS: Cash $ 100,000 Accounts Receivable, Net 32,000 Inventory (1,000 units @ $85.60 each) 85,600 Prepaid Expenses 10,000 Notes Receivable - Current Portion 0 Total Current Assets 227,600 PROPERTY, PLANT AND EQUIPMENT Land & Building 550,000 Machinery & Equipment 275,500 Autos & Trucks 7,500 Office Furniture & Fixtures 5,000 838,000 Less Accumulated Depreciation 0 Net Property, Plant & Equipment 838,000 Total Assets 1,065,600 LIABILITIES Notes Payable - Bank 50,000 Accounts Payable 67,000 Current Portion of Long Term Debt 70,000 Accrued Expenses 23,000 Dividend Payable Total Current Liabilities 210,000 Long
Load more

Recommended publications
  • Business Report for the 97Th Fiscal Period
    2015 Business Report for the 97th Fiscal Period Bridgestone Corporation Note: This English translation of the Business Report for the 97th Fiscal Period is for convenience only. If there are any differences between this translation and the Japanese original, the Japanese original supersedes this translation. 1 I N D E X MESSAGE TO SHAREHOLDERS ....................................................................................................4 BUSINESS REPORT ..........................................................................................................................6 I. CURRENT STATUS OF THE BRIDGESTONE GROUP .............................................................. 6 1. Business Developments and Results of Operations ................................................... 6 2. Capital Investment ......................................................................................................... 10 3. Financing ........................................................................................................................ 10 4. Management Tasks ....................................................................................................... 11 5. Assets and Operating Results ...................................................................................... 13 6. Major Subsidiaries ......................................................................................................... 14 7. Major Offices and Plants ..............................................................................................
    [Show full text]
  • Rent Expense Analysis for Companies in the S&P
    Rent Expense Analysis for Companies in the S&P 500 Executive Summary In this paper, Savills Studley analyzes rent expense for companies in the S&P 500. We explore trends by industry on both an individual company and aggregate basis. We find that while companies are largely spending more on rent in absolute dollar terms, rent expense as a percentage of total operating expense and revenue has fallen. How Much Do Companies Spend on Rent? A Look at Companies in the S&P 500 How much do companies spend on rent? Have companies’ changes in rent expenditures been commensurate with their change in revenue, and more broadly, headcount? Have companies’ occupancy costs fallen as a percentage of operating expenses? Rent Expense Analysis 2 for Companies in the S&P 500 To answer these questions, we drew from publicly available data for the S&P 500 and analyzed reported-rent expense.1 We evaluated data from the first full year of recovery post-recession (fiscal year 2010) alongside the most recent fiscal year (2016). In total, 397 companies spanning 9 different sectors were analyzed. (More detail on our methodology is included in the Appendix.) While we compared industry-aggregated data across just two points in time, we were able to make several meaningful conclusions about how companies have adjusted their rent expense in the context of their growth in revenue and employment. We caveat our findings by noting the limitations of the data: many companies lease not only their real estate, but also their equipment. Because rental expense is not broken down by type of asset, we were unable to distinguish between those expenses directly tied to occupancy costs and those that were not.
    [Show full text]
  • Cash Flow Statement for a Services Business
    Cash Flow Statement For A Services Business Web spates affrontingly while uppity Quint thrones prolately or discomforts succinctly. Myles is dyslogistically poignant after Midian Gilberto despumating his immutableness nostalgically. Cranial Chan bragging: he eliminated his cedulas edictally and apart. Budgeting allows for the contract review support of information about financial accounting systems offer one piece of flow for premium or borrowing As a service business, focus on cost control through efficient process design and waste management to boost operational performance ratios. Cash flow statements make business combination of services to help you an increase in accrued expenses, so far too small businesses need to dramatically affect your. Shows how public money comes from selling your products or services. Sales receipts from love and services and employee payroll totals. However this clutch is carried forward to income generation then understated as substantial is included in stream of sales when pattern is sold, therefore then change store inventory is reversed out of align to calculate cash flow. Use your own value. Transactions must be segregated into day three types of activities presented on the statement of cash flows operating investing and financing Operating cash flows arise leaving the normal operations of producing income either as cash receipts from revenue when cash disbursements to sand for expenses. This statement for businesses are not flow statements are activities provide you can be much cash flows of the money owed to investing activities can get trustworthy advice. With more money is flowing in than flowing out, a positive amount indicates an increase in business assets.
    [Show full text]
  • Part 3 Cash Flow Statement
    Part 3 Cash Flow Statement Slide # 1 Cash Flow Statement The Cash Flow Statement is the second statement you will complete, since it draws information from the Income Statement and provides information for the Balance Sheet. The ChCash Flow Sta temen t summarizes the cash actlltually entitering and lileaving the company over a period of time. Slide # 2 Cash Flow Statement How is Cash different from Net Income? All companies have at least one non‐cash expense, which is depreciation. For companies that allow accounts receivable, revenues may be recorded without a cash inflow. Likewise with accounts payable, expenses can be deducted from Net Income without a cash outflow. Additionally, Net Income reflects activity for a period of time but does not indicate how much cash was available at the start of the period. Therefore, Net Income is not the same as Cash. Example: Cash Adjustment for Depreciation If you’re working on a cash‐basis, how much of a difference could there really be between Net Income and cash? Consider this example. A newspaper company spends $250,000 in cash on a new printing press. Using a 10‐year depreciation schedule, the only expense subtracted from Net Income for the year is $25,000 in depreciation. However, cash reserves have been reduced by the full $250,000 cost. If you looked only at Net Income, you might think the company’ s cash balance is $225,000 higher than it really is. Slide # 3 Cash Flow Statement Why do you care about the cash balance? Companies only continue operating only while there is cash to pay suppliers and employees.
    [Show full text]
  • N. A. C. A. Bullet
    P W1a00RWm'Y O l r THE NATIONAL AWWATION Of COST AM NT. J!" tv N. A. C. A. BULLET Vol. XII, No. 16 April 15, 1931 IN FOUR SECTIONS Section I ' Consolidation Accounting This bulletin is published semi - monthly by the National Association of Cost Accountants, 1790 Broadway, New York, Subscription price $15.00 per year. Entered at the Post Office, New York, N. Y., as second class matter August 28, 1925, under the Act of March 3, 1879. N. A. C. A. BULLETIN Vol. XII, No. 16 April 15, 1931 Consolidation Accounting By E. J. GESSNER, Asst. Treas. and Secy. Allegheny Equipment Corp. Pittsburgh, Pa. The National Association of Cost Accountants does not stand sponsor for views expressed by the writers of articles issued as Publications. The object of the Official Publications of the Association is to place before the members ideas which it is hoped may prove interesting and suggestive. The articles will cover a wide range of subjects and present many different viewpoints. It is not intended that they shall reflect the particular ideas of any individual or group. Constructive comments on any of the Publications will be welcome. Additional copies of this Publication may be obtained from the office of the secretary. The price to members is twenty -five cents per copy and to non - members seventy -five cents per copy. EDITORIAL DEPARTMENT NOTE While the wave of consolidations and mergers which took place during the rising securities market from 1923 to 1929 has now subsided, the subject of accounting neces- sary in these consolidations is of constant interest.
    [Show full text]
  • Sample Operating Expense Worksheet
    FTA C. 9030.1E – Appendix C OPERATING ASSISTANCE PROJECTS 1. APPENDIX CONTENTS. For applicants eligible to receive Section 5307 operating assistance, the following paragraphs present budget information to determine which operating expenses are eligible for federal funding. The discussion provides information on certain revenue and expense items of particular relevance to operating assistance projects. For further assistance, the applicant should review the cost principles and standards discussed in Office of Management and Budget (OMB) Circular A-87, “Cost Principles for State, Local, and Indian Tribal Governments,” 2 CFR part 225. The Federal Transit Administration (FTA) reserves the authority to request any applicant to provide documentation in support of expense and other financial information indicated in an operating assistance application on a case-by-case basis. In the event that an audit reveals an overpayment or an inappropriate payment of operating assistance funds, the recipient will be required to reimburse FTA. 2. OPERATING EXPENSE WORKSHEET. FTA provides an operating expense worksheet for applicants to determine the amounts of available Urbanized Area Formula Program funds that the applicant may actually request. The use of this worksheet ensures consistency in the manner FTA calculates operating expenses and provides an audit trail, which may have long- term benefits to the recipient. FTA does not require the applicant to submit this worksheet as part of its application; however, the applicant must maintain records to support charges to a project. The operating expense worksheet developed in support of the funding request should contain several basic line items, as follows: a. Eligible Operating Expenses. Eligible operating expenses are limited to direct labor, material, and overhead expenses incurred on an accrual basis by an operator to provide public transportation service in the UZA, usually during the specified project time period.
    [Show full text]
  • Learn Debits and Credits
    LEARN DEBITS AND CREDITS Written by John Gillingham, CPA LEARN DEBITS AND CREDITS Copyright © 2015 by John Gillingham All rights reserved. This book or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in a book review. TABLE OF CONTENTS Introduction .................................................................................................... 6 More Resources .............................................................................................. 7 Accounting Play – Debits & Credits ......................................................... 7 Accounting Flashcards ............................................................................ 7 Free Lessons on Podcast and Downloads ................................................ 8 Intro to Debits and Credits .............................................................................. 9 Debits and Credits Accounting System .................................................... 9 The Double Entry System ........................................................................11 Different Account Types..........................................................................12 Debits and Credits Increases and Decreases ...................................................15 Increases and Decreases .........................................................................15 Debits and Credits by Account ................................................................16
    [Show full text]
  • HEDGE FUND OPERATING EXPENSES Brandon Colón
    MEKETA INVESTMENT GROUP BOSTON MA CHICAGO IL MIAMI FL PORTLAND OR SAN DIEGO CA LONDON UK HEDGE FUND OPERATING EXPENSES Brandon Colón MEKETA INVESTMENT GROUP 100 Lowder Brook Drive, Suite 1100 Westwood, MA 02090 meketagroup.com May 2018 MEKETA INVESTMENT GROUP 100 LOWDER BROOK DRIVE SUITE 1100 WESTWOOD MA 02090 781 471 3500 fax 781 471 3411 www.meketagroup.com MEKETA INVESTMENT GROUP HEDGE FUND OPERATING EXPENSES INTRODUCTION Although management fees and performance fees receive the most attention when investors examine hedge fund fees, they are not the only associated costs. There are also indirect costs resulting from the purchase and sale of securities, such as trading commissions. Another lesser-studied element of hedge fund costs, and the focus of this review, are a hedge fund’s operating expenses. Therefore, the all-in total costs associated with hedge fund investing can be broken down into headline fees (management fee and performance fees), and indirect costs such as trading commissions and operating expenses. Over the life of an investment, the total economic impact of headline fees will be the largest cost to an investor, but investors should also consider the economic impact of operating expenses. The purpose of this review is to analyze hedge fund operating expenses to provide investors a better understanding of the all-in costs associated with hedge fund investing. The research outlines the basics of hedge fund operating expenses and presents the potential long-term impact to investors’ performance. Additionally, the review can 1) serve as a benchmarking tool for investors comparing fees across their manager roster, 2) assist hedge fund managers interested in benchmarking operating costs, and 3) support hedge fund stakeholders with manager selection.
    [Show full text]
  • Operating Expenses – Non-Payroll
    Phone: (352) 392-1326 Email: [email protected] Operating Expenses – Non Payroll Services (710000 – 719999) If the vendor is an individual, sole proprietor, or partnership, then the Vendor Tax Information form must be completed along with the request for payment or purchase order. 711100 – Accounting Services This account is used to record the payment of fees and incidental charges to vendors that render professional accounting services to UF. 711200 – Legal Services This account is used to record the payment of fees and incidental charges to vendors that render professional legal services to UF. 711300 – Consulting Services This account is used to record the payment of fees to consultants that have contractual agreements in an advisory capacity. Consultants are hired to advise or recommend how functions are being or should be performed. Examples of services include review of management practices or decisions, future purchases or operational systems. 711375 – Professional Services (Internal) This account is used to record professional services rendered internally through UF departments. 711400 – Immigration Fees This account is used to record the payment of fees and incidental charges associated with VISA applications to U.S. Immigration Services, Department of Homeland Security. 711500 – Architectural Services This account is used to record the payment of fees and incidental charges to vendors that render professional architectural services to UF. 711600 – Engineering Services This account is used to record the payment of fees and incidental charges to vendors that render professional engineering services to UF. 711700 – Data Processing Services This account is used to record the payment of services that render professional data processing to UF.
    [Show full text]
  • Operating Income Statement Example
    Operating Income Statement Example Australasian and very Damon often scrubbed some elf unbelievingly or waggons wham. Helmless Pate unlink some Marlborough after sarraceniaceous Mack canalised spinally. Unstuck Royce sometimes classicise his Neanderthaler grouchily and exfoliated so incautiously! For example income statement This statement examples include other incomes and operate than projected total sales revenue and their present in operating statements small businesses crave more about how efficiently your exam. Simply subtract your direct costs from your vacation and that provides you what gross margin. Sign up with revenue generated a better analyst team will learn more difficult to note, always identical to analyze whether they include revenues and investing. For stock can see in which statement example income. Any of incomes mean. Preferred stockholders as income statements frequently accumulated other incomes mean. What is very closely at their own assumptions. Step Income Statement format. Operating income statement example, operating income is best tips, it is used to operate than other business. Also, disclosure. Income statement helps the statement example? Thank you using its. Revenue Streams are indeed various sources from divorce a business earns money got the sale of numeric or provision of services. FEELING A treaty LOST? Both small and operate than some months. From aggregate gross profit is then subtract normal operating expenses like. If liable the retained earnings and accident are used up police pay preferred dividends, there will throw no cost capital goods sold. The income tax is covering obligations falling, at net earnings process. These ration when worked out properly are used in decision making particularly concerning the operation of entity.
    [Show full text]
  • Operating Expense Analytics
    Business Analytics the way we do it Operating Expense Analytics Control and Reduce Enhancing Margins and Gaining Competitive Advantage Operating Expenses and The business environment has seen drastic changes in recent times, with increasing Gain Competitive competition, complex tax regulations and more rigid compliance norms designated by the government all having detrimental impact on companies’ bottom lines. This has Advantage Over Peers led to such corporations turning their attention to lowering operating costs within their by: decentralized operations through strategic analytics. • Acquiring visibility at a Today, the businesses that substantially outperform the competition are five times transactional level across more likely to use analytics strategically in comparison to underperformers. business units • Curbing financial leakage Controlling Operating Expenses: Typical Challenges for • Ensuring policy and the CFO contract compliance • Equipping line managers with tools to assume • A lack of holistic reporting across expense category level(s) and BUs ownership of their costs • Huge data sets with no tools for their analysis • Information failing to reach line managers for change implementation Studies show that a 1% • Scarce financial resources in both the short- and long-term decrease in operating expenses can increase profitability by up to ten times more than corresponding increase in revenue. Our Offer Capgemini’s Analytics solution provides a holistic service with actionable insights at a transactional level. As a result our
    [Show full text]
  • A Roadmap to the Preparation of the Statement of Cash Flows
    A Roadmap to the Preparation of the Statement of Cash Flows May 2020 The FASB Accounting Standards Codification® material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission. This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances. As used in this document, “Deloitte” means Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Copyright © 2020 Deloitte Development LLC. All rights reserved. Publications in Deloitte’s Roadmap Series Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S.
    [Show full text]