MODULE 1: INTRODUCTION TO FINANCIAL ACCOUNTING

DAY 1
Accounting Rules – GAAP, IFRS, FASB, SEC
Key Accounting Principles – Revenue Recognition, Matching, Historical Cost, Conservatism
The Accounting Cycle – journals, ledgers, adjusting entries, trial balances, and closing entries
Accounting for Current and Long-term Assets – Inventories, Receivables, Depreciation
Accounting for Current and Long-term Liabilities – Notes, Mortgages, and Bonds
Financial Statements – Income Statement, Balance Sheet, Statement of Cash Flows

Application Exercise: Based on a web consulting company, opened for business in January 2012, participants will: analyze a series of transactions, make journal and other recording entries in the accounting cycle, and prepare financial statements for the firm’s first year of operation.

MODULE 2: FUNDAMENTALS OF CREDIT ANALYSIS

DAY 1
Introduction to Credit Risk Analysis – The ‘Five Cs’ of credit analysis
Understanding the Loan Request - Why do companies borrow? How will they pay us back?
Analysis of Historical Performance - Key Income Statement and Balance Sheet Ratios
Preparation of Cash Flow Statements – Direct and Indirect methods

Case Study: A small rapidly-growing retailer/distributor has presented a set of financial statements to your Bank hoping to obtain a five-year loan to finance anticipated growth and the expansion of the firm’s warehouse facilities. Participants will: calculate key ratios and generate cash flow statements in order to analyze and describe the firm’s historical performance.

DAY 2
Industry Analysis – Michael Porter’s Competitive Analysis of Industries, Five Forces Analysis
Business Analysis – Strategy, Management, and SWOT Analysis
Coverage Ratios – Debt Service Coverage and Fixed Charge Coverage

Case Study: A $2MM customer faces a need for increased bank financing due to its sales growth and margin pressure. Participants must identify the reasons for the increasing borrowing need, estimate the amount of borrowing necessary, and assess the loan’s attractiveness to your Bank. Participants will: complete an industry and business analysis, analyze historical financial ratios, develop cash flow statements, and calculate coverage ratios.

DAY 3
Capstone – Put it all together

Case Study: A $12MM retailer has grown steadily through 2007. Analysis of the company’s financials reveals solid performance, but there are early warning signs of potential credit issues. Participants will: examine the loan request; calculate and analyze ratios, cash flow statements, and coverage ratios; complete an industry and business analysis; and make an initial loan recommendation to a senior credit officer.

MODULE 3: FORECASTING, LOAN STRUCTURING, & LENDING TECHNIQUES

DAY 1
Forecasting – Logical assumptions in order to project future business performance
Financial Models - Base case and downside scenarios (sensitivity analysis)

Case Study: Using the same cases presented in Module 2, participants learn how to develop assumptions and create financial models that project business performance given risks in the industry. Participant models will demonstrate whether the company has the ability to generate cash to repay future debt.

DAY 2
Loan Structuring – Addressing client’s borrowing needs while protecting the bank’s capital
Types of Loans – Short and long-term facilities
Covenants – Financial, affirmative, and negative covenants
Defaults and Remedies – Payment, covenant and cross defaults and their potential remedies

Case Study: A motorsport dealership has approached your Bank for a long-term loan for a building renovation and a working capital loan for day-to-day operations. Management has provided audited financials and projections for future performance. Participants will: create financial models that demonstrate both base case and downside scenarios, and make a recommendation about the loan’s potential structure including facility type, covenants, rights, remedies, and guarantees.

MODULE 4: CORPORATE FINANCE FUNDAMENTALS

DAY 1
Creating Shareholder Value – Dupont Model, ROE and the Cost of Equity
Time Value of Money – FV, PV, NPV, and IRR calculations
Corporate Valuation Income Statement Techniques – EBITDA and P/E Multiples
Corporate Valuation Balance Sheet Techniques – Book and Liquidation Value
Discounted Cash Flow (DCF) Analysis – Projections, Free Cash Flow, Weighted Average Cost of Capital, Terminal Value, and Enterprise Value

Application Exercise: Students analyze a $90MM manufacturer of frozen bakery products. Using financial statements provided by the firm, participants will calculate: free cash flow, Weighted Average Cost of Capital, cost of equity using the Capital Asset Pricing Model, and the firm’s enterprise value using DCF analysis. Participants will then compare the DCF valuation with other valuation techniques.

DAY 2
Free Cash Flow (FCF) – Direct, Indirect, and NOPAT methods
Weighted Average Cost of Capital (WACC) – Blended cost of required returns for debt and equity
Capital Asset Pricing Model (CAPM) – Calculate the cost of equity
Enterprise Value – PV of projected FCF’s discounted by the after-tax WACC

Case Study: A longtime corporate bank customer is considering buying out his partner’s half of a $9MM company. Participants will value the company using DCF analysis to advise about the fairness of the purchase price.

MODULE 5: PERSONAL FINANCIAL STATEMENTS & TAX RETURN ANALYSIS

DAY 1
Guarantor Analysis – Personal cash flow analysis
Personal Financial Statements – Differences from corporate forms, calculating adjusted net worth
Personal Tax Returns – Types of taxes, exemptions, deductions, credits, AMT, Form 1040, Schedules

Case Study: Part 1- A married couple has approached your Bank for a $1.6MM loan to purchase a strip mall on Cape Cod. Participants will analyze: the project (business and industry, cash flow and sensitivity, breakeven); the collateral (loan to value, capitalization rates); and the guarantors (adjusted net worth and personal cash flow) in order to make a recommendation about making the loan.

DAY 2
Forms of Business Organization – Proprietorship, Partnership. LLP, LLC, S Corporation
Corporate Tax Returns – Schedule C, Schedule E, K-1s, Form 1120
Global Analysis – Cash flows among and between related companies with common ownership

Case Study: Part II – The same couple from Part 1 now owns and manages several commercial real estate properties each separately organized as an LLC. They have asked your Bank to refinance the debt on one of the properties to take advantage of 2013’s attractive mortgage rates. Students will: construct and analyze cash flows from the different business and individual tax returns in order to evaluate the resources available to service the refinance. Participants will use global analysis to identify pressures on future cash flows and debt service capabilities.

MODULE 6: BUSINESS WRITING & CREDIT MEMORANDA

DAY 1
Research – Writing is only as good as the evidence collected and analyzed
Plan – Purpose, organization, and focus
Draft – Techniques for writing about numbers, overcoming writer’s block
Write – Powerful words, effective sentences, coherent paragraphs, and choosing the right style

Application Exercise: Participants will practice writing powerful, persuasive memos that command the readers’ attention, communicate the bank’s messages, and build participants’ professional reputation.

DAY 2
Edit (Macro Issues) – Design for ‘high skim value’ using headings, white space, and signposts
Edit (Micro Issues) – Edit for brevity, clarity, and conciseness
Correctness – Check for spelling and grammar mistakes (credibility busters)

Application Exercise: Using any one of the case studies previously analyzed, participants will write a clear credit memorandum that has ‘high skim value’ and demonstrates good research, planning, writing, and editing skills. Participants will also practice presenting their credit conclusion to a mock credit committee

MODULE 7: ADVANCED CREDIT SKILLS

DAY 1
Business, Industry, and Management Analysis – Identify strengths and risks
Key Financial Ratios – Calculate and analyze historical operating performance
Asset Efficiency – Analyze the working capital cycle
Cash Flow Statements – Understand sources and uses of cash
Debt Service Capacity – Analyze strength of repayment sources
Early Warning Signs – Detect early warning signs of financial instability

Case Study: Part 1- A long-term client, has approached your Bank requesting a $2MM working capital line and a $1MM, 5-year term loan for plant expansion. Financial performance is strong but careful analysis reveals early warning signs of significant credit concerns. Participants will analyze the request, identify industry risks, calculate ratios on historical performance, and analyze debt service capabilities.

DAY 2
Managing a Deteriorating Credit – Create action plan with client
Managing the Client Relationship – Discuss sensitive credit issues
Loan Structuring – Design structure to protect bank’s capital

Case Study: Part II- A year later the manufacturer reports a significant after-tax loss. Participants will analyze what caused the deterioration and present analytical conclusions about actions the Bank should take to protect its exposure in this credit situation.