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hi, could anyone pls help me out with a project on credit risk analysis, credit appraisal for financing of loans in a financial instituition for my summer project. its really important and urgent
From India ,
Credit appraisal involves analysis of liquidity position/ financial soundness of the company. Although, the analysis also covers understanding growth trends in revenues and earnings, and profit margins, more emphasis is required to be placed on liquidity-both long term and short term. Credit analysis or credit appraisal typcically involves micro-analysis of the key financial statements ie Income Statement, Balance Sheet and Cash flow Statement. The important paramters that are to be looked while analysing liquidity are:

a) Debt Equity Ratio
b) Total Debt to Total Assets
c) Current Ratio and Quick Ratio
d) Sales to Working capital Ratio
e) Inventory Turnover Ratio

Along with the above mentioned ratios, one needs to look at aspects like aging schedule of debtors, quality of inventory ( fast-moving, slow-moving and obsolete). Credit risk analysis or credit appraisal basically revolves around the premise of ability of borrower to service its debt through cash flows. Primary cash flows are those that are generated through operations while secondary cashflows are cash & cash equivalents plus marketable securities.

While analysing credit risk of the borrower, the bank/ credit rating agency needs to consider even the future growth potential of the business and incorporate in its judgement, those issues that can possibly put business at risk. For this one needs to understand the future growth strategy & business outlook and how the company wants to move ahead with its plans. The potential impact of any future growth initiatives can be critical today as it may put additional stress on current profitability and liquidity of the business.

Hope the above gives you some idea on how to progress. However, if things aren`t clear or you haev any questions, please feel free to drop your query on e-mail stated below or on this forum. Wishing you all the best for the project...!!

Warm Regards,
Sameer Sakharkar

From India , Mumbai
Hi Sameer,
I saw your write-up on Credit appraisal, needed your advice on any recommended book on this topcis. As I need to study this subject in detail for ny new job profile.
It will be a great help, if you may recommend few good ones. Thanks.
regds,
Sarfaraz K

From India , Mumbai
hi sameer,
I saw ur post, and its very informative. but i want to know is there any specific topic about which i can learn further and prepare a project. Area of project given by my project guide is to compare their bank's risk analysis policy with other banks.

From India , Gurgaon
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