Key Ratio Analysis for Bankers

Gain more knowledge of how to interpret and calculate ratios within the financial industry.

Trying to make a credit decision for a company or an individual can be difficult without having all the available information. While there are credit reports, bank references, and trade references, they may not provide the right or enough information to make a sound credit decision. Credit reports for individuals can provide more accurate information, but not as many ratios are needed as there are with corporate financial statements. The best tool to help make a sound credit decision is audited financial statements from your customer. This presentation will help you understand the information encompassed in statements, what ratios to use, and their meaning. You will go over the financial ratios that can be used by looking at the income statement, balance sheet, and statement of cash flow. Learn how to calculate the ratios and what the resulting numbers mean. Discuss five areas of ratios: profitability, leverage, activity, efficiency, and liquidity, and the meaningful ratios under each category. You will be introduced to the Altman Z score, which can show the probability of a company going into bankruptcy in the next twelve months and review how to determine the auditors' opinion on a set of financial statements. Lastly, learn how to assemble a financial summary to present to management to support your findings.