There is an old saying in credit analysis, "Borrowers pay back loans from cash flow, not profits."
But it is not just cash flow; it is cash flow from operations that is the most desirable source of repayment because it is generated by a borrower managing its working capital assets and earning a sustainable profit.
This webinar will explain the difference between profits and cash flow as well as cash flow from operations vs. cash flow from financing and investing activities. After all, borrowing from another lender or liquidating fixed assets to pay you back ultimately hurts the long-term viability of the borrower.
Why you should Attend:
The webinar will explain how the cash flow statement is derived from the
balance sheet and the income statement, and then it will describe its
three component cash flow activities-operating, financing, and
By the end of the session, you will see how cash flow is incorporated into the analysis and underwriting of a business borrower.
Areas Covered in the Session:
Upon completion of this webinar, the participant will have a good
understanding of how cash flow is calculated and more importantly, how
to interpret its meaning.
Specific areas that will be covered include:
- An explanation of how Cash Flow Analysis relies on the conversion of
an Accrual Basis Financial Statement into a Statement of Cash Flow (or
Cash Basis Statement) because loans are repaid with cash and not profits
- Review of the Rules of Cash Flow in determining how much cash is generated from items on the balance sheet
- Global Cash Flow Analysis Methodology utilizing financial
statements, tax returns and credit reports of commercial borrowers and
- Comparison of operating cash flow to the more inaccurate traditional
cash flow (profits plus depreciation) and EBITDA (Earnings Before
Interest, Taxes, Depreciation, and Amortization) method of determining
- A free cash flow method which can convert EBITDA into operating cash flow
Speaker will also be talking about:
- Accounting method: Cash basis vs. Accrual basis: Understanding the
differences in the two accounting methods and to analyze their
advantages and disadvantages
- Accrual method: Comprehension of Financial statements prepared on an
Accrual Basis and recognizing all economic events regardless of the
accumulation of cash at the point of sale or the payment of costs and
expenses at the time the costs and expenses are incurred
- Statement of Cash flows: Shows the cash inflows and cash outflows from operating activities, investing activities and financing
Who Will Benefit:
- Commercial Loan Officers
- Credit approvers
- Loan/credit review staffs
- Business Development Representatives
- Branch Managers
- Business Credit Analysts
- Risk Managers of Real Estate companies and FIs
- Accountants and Auditors