How to Evaluate Current Assets

Businessman-working-with-current-assets

When we look at a business’ balance sheet as analysts, we like to see that there are significant current assets which, we think, provide the business with liquidity and so make our lending reasonably safe. But do they really mean there is liquidity in the business or are we just fooling ourselves? The Accounting Equation … Read more How to Evaluate Current Assets

The one extra thing that all credit deals must have

Banker thinking about a secondary source of repayment

In all the analysis, financial information and paperwork, its easy to lose sight of what is probably the most important part of any credit deal – if you don’t want to lose money, that is! It’s cash that repays debt When I was a credit manager back in the dark ages, I used to get … Read more The one extra thing that all credit deals must have

Starting Out Using Financial Ratios

Calculating financial ratios

When it comes to financial margins and ratios we like to think they tell us what we need to know about the business. Actually, they tell us very little unless we see them in their proper context. Why use margins and ratios? Financial statements are analysed to assess the financial performance and financial position of … Read more Starting Out Using Financial Ratios

Profit or cash flow; which is most important for a lender?

Bank notes and coins

Fundera.com quotes a US bank study published in 2019 which showed that 82% of business failures in the US were caused by a lack of cash flow. What might business owners say? Ask business owners which of profit or cash flow they think most important and you’d get a mixed response.  In times of crisis, … Read more Profit or cash flow; which is most important for a lender?

Depreciation: Three things lenders should know

Businessman looking puzzled

There are three important issues around the topic of depreciation that, if you’re aspiring to become an astute lender, you should be aware of. Depreciation is a real expense Depreciation is often seen by lenders and analysts as something to be ignored because it’s not a cash expense but that’s really not the correct approach … Read more Depreciation: Three things lenders should know

Lending to multi-nationals: The risks

Globe looking like a jigsaw puzzle

Lending to multi-national companies brings with it some very specific – but very real – risks. Here are three of major ones; Lending to multi-nationals – Where does the money go? If you’re lending to a multi-national business for the first time, how can you be sure that the money you lend won’t find its … Read more Lending to multi-nationals: The risks