Reference no: EM132951309 , Length: word count:4000 words
FLF5722 Mechanics of Credit Risk Analysis Assignment - Middlesex University London, UK
Assignment Question - Participants are provided with the financial statements of Ted Baker Plc
The following facility is requested by the company: £90,000,000 long term debt to restructure the balance sheet. The company currently has a revolving credit facility amounting to £180,000,000. The company's current borrowing's structure is mismatched with too much short-term debt.
You are required to: To make a recommendation if a Bank should proceed or not with this loan, highlight the strategic issues involved in making this decision, communicate all the risks you can identify, explain what extra information needs to be provided (if any) and state your suggested plan of action (whether your advice is to proceed or not to proceed with the deal).
The areas which need to be covered in the assignment, should include:
1. Executive Summary END
2. Description of the requested facility
3. Background Information and business analysis
4. Economic/Industry/Sector/Market Information and Analysis
5. Financial Statements - summary IDENTIFY ANY POTENTIAL FINANCIAL RISKS
6. Risk Assessment
7. Projections - THIS IS IMPORTANT SECTION - CAN THE CLIENT SERVICE THE DEBT
8. Recommendation
1. Executive Summary
An executive summary is a brief section at the beginning of the credit information memorandum that summarizes the document - it is not background and not an introduction. When your boss reads only the executive summary he or she should get the essence of the document without fine details. The executive summary should answer the reader's questions in brief. For the credit information memorandum, the executive summary should try to answer the following questions:
Briefly, what is this about?
Why is it important?
Why was it undertaken?
What are the major findings or results?
What more is to be done, or what is the recommendation?
For a recommendation, the executive summary should answer the following questions:
What do you propose or recommend?
Why do you propose it?
What is the next step?
3. Background Information and Business Analysis
Provide a brief summary of the business the customer is involved in, including their position/history:
What do they do and how do they do it?
Where are they located?
What is the business strategy and growth plans?
How long have they been in business - mature or growing business?
What are the key relationships - customers, suppliers, contractual arrangement and key conditions (including customer and supplier concentration)?
What is the set-up of distribution and procurement channels?
Key Risks facing the customer and appropriate mitigants
Brief Matrix of the division headlines
Material historic events of the Group
Any disputes with regulatory authorities and basis of resolution
4. Economic/Industry/Sector/Market Information and Analysis
Once you have obtained the relevant information please answer the following questions:
What are main business activities and their relative importance
What are the main markets in which it operates
What is the strategy of the company
What are the main risks facing the company
Which of Porter's Generic strategies is the company pursuing
5. Financial Statements - Summary
Reviewing the Accounting Policies
Answer the following from the notes to the financials:
On what basis has the company's Annual Report been prepared e.g. historic cost
Are the financial statements qualified in any respect by the Auditors
What aspects of the accounting policies do you consider to be unusual and why?
Are there any items in the financial statements that need further investigation, because there may be some creative accounting? What are they?
Are there any "off balance sheet items"? What are they and how significant are they
6. Risk Assessment
Risk is 'the condition in which there exists a quantifiable dispersion in the possible outcomes from any activity', i.e. the possibility that actual results will turn out differently from those expected.
Risk can be looked at in two ways:
(a) Downside that something could go wrong and the effect is damaging
(b) Upside, where things work out better than expected In business 'risk' generally means 'what could go wrong?'
Risk is quantifiable, at least in theory, whereas uncertainty is not.
Note - Need 4000 words paper + title page + references with in-text citations.
Attachment:- Mechanics of Credit Risk Analysis Assignment Files.rar