Basic Credit Skills 8-10 Juli 2020
Basic Credit Skills 8-10 Juli 2020
Basic Credit Skills 8-10 Juli 2020
1
INTRODUCTION
OBJECTIVES
2
INTRODUCTION
FACILITATOR & CLASS ADMINISTRATORS
• FACILITATOR
JONO EFFENDY
• CLASS ADMINISTRATORS
MELIANNA PRANITA
3
LEARNING AGENDA
08.35 – 09.05 Pre-Test 10.30 – 12.00 Rational of Borrowing Needs 11.00 – 12.00 Exercise Day 3 : PT GG & PT HM
and Debt Sizing
09.05 – 12.00 Fundamental of Credit 12.00 – 13.00 Lunch Break 12.00 – 13.00 Lunch Break
12.00 – 13.00 Lunch Break 13.00 – 15.00 Macro, Industry and Business 13.00 – 13.30 Collateral Analysis
Analysis
13.00 – 15.00 Accounting and 13.30 – 14.00 Loan Agreement
Financial Statements
14.00 – 14.30 Loan Monitoring
14.30 – 15.00 Post Test
LEARNING AGENDA 4
PRE-TEST
BASIC CREDIT SKILLS
bit.ly/BCSTEST
CHAPTER 1
FUNDAMENTAL OF CREDIT
6
CHAPTER 1: FUNDAMENTAL OF CREDIT
TOPICS TO BE DISCUSSED
▪ Overview of Credit
• What is Credit?
• Credit Segmentation
• Credit Process in a Bank
▪ Essential of Credit Analysis
• Basic Concept of Credit Analysis: 5Cs
• Framework of Credit Analysis
• Materials for Credit Analysis
• SLIK
▪ Credit Quality
• Credit Quality and Financial Impact
• OJK’s Rating and Credit Quality
7
OVERVIEW OF CREDIT
WHAT IS CREDIT?
▪ Credit (loan) means receiving something of value now and promising to
pay for it later, often with a finance charge (i.e. interest) added by the
lender.
• Corporate:
✓ For Business/Productive Purpose (Working Capital
or Investment Loan)
COMMERCIAL
Rp 25-100 billion N/A
BANKING • Investment Loan (Long Term)
✓ Fixed Assets
ENTERPRISE BANKING Rp > 100 billion Rp > 500 billion ✓ Other Long Term Assets
WHOLESALE • Others (e.g. project financing and company
Public Company and MNC
BANKING acquisition)
Combination of
MONITORING AND Standardized and clear
COLLECTION standardized and Personalized
pattern
personalized approach
12
ESSENTIAL OF CREDIT ANALYSIS
BASIC CONCEPT OF CREDIT ANALYSIS: 5Cs
Most important of 5Cs especially in difficult
situation (Reputation/Track Record in the
Market/Business) – SLIK checking, Trade Checking, and
2nd way out:
Character Family/Personal Life Assessment
▪ The reporting entity may not use the debtor’s information received
for the reporting entity ‘s purposes other than for the following
purposes:
• Supporting the smooth process of providing credit facilities
• Implementation of risk management
• Identify the quality of the debtor in compliance with OJK or other
authorized parties regulation
Example:
PT XYZ, a debtor of Bank X has a loan exposure of IDR 100 billion, with a potential recovery rate from its collateral of
IDR 60 billion. The probability of default of the loan is 5% (based on its rating history analysis). Therefore, credit
100−60
provision allocated for the loan is IDR 2 billion (5% x 100 % x IDR 100 billion).
1 Current
2 Special Mention
3 Substandard
• Business Prospective 4 Doubtful
• Debtor’s Performance
• Repayment Capacity 5 Loss
Very limited or no
POTENTIAL GROWTH Good Limited Slowing down Doubtful or stop
growth
MANAGEMENT
CAPABILITY Very good Good Standard Inexperience Low
EARNING GAIN High and stable Good Low Very low Significant loss
PAYMENT No delinquent
DELINQUENCY ≤ 90 days > 90 - 120 days > 120 - 180 days > 180 days
(On time)
CHAPTER 1: FUNDAMENTAL OF CREDIT 21
Source: Youtube
“When lending people money, be
sure their character exceeds
their collateral”
END OF THIS SECTION
CHAPTER 2
24
CHAPTER 2: ACCOUNTING AND FINANCIAL STATEMENTS
TOPICS TO BE DISCUSSED
▪ Overview of Accounting
• Definition and Standards of Accounting
• Functions of Accounting
▪ Basic Accounting Principles
▪ Basic Accounting Process
▪ Type of Financial Statements
• Income Statement
• Changes in Stockholders Equity Statement
• Balance Sheets
• Cash Flow Statement
• Notes to Financial Statement
▪ Audit Opinion and Quality of Financial Statements
25
OVERVIEW OF ACCOUNTING
DEFINITION AND STANDARDS OF ACCOUNTING
“The art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions and events which are,
in part at least, of financial character, and interpreting the results
thereof”.
Performance
Planning Controlling
Measurement
• Used for valuing items from the prices at which items were brought and sold are used for
4. Historical Cost the valuations.
• Real values do change due to inflation and recession
• always in keen focus what with all the accounting scandals in the news nowadays.
5. Full Disclosure • companies have to reveal every aspect of the important/ substantial information in their
financial statements.
• States that the accrual system of accounting be used and for every debit there should be a
credit and vice versa
7. Matching • Companies reveal their income and expenses in the same time period in which they were
accrued
• Assume that when a product has been sold or a service has been performed, revenues are
8. Recognition recognize without regard to the time that the money is actually received.
• Accountant have to adopt and determine what alternative that will give the best result to
10. Conservative anticipate losses or increase gains depend on company own internal strategy.
Prepare Obtain
Financial Statements Source Document
06 01 As transactions occur
Record
Record Journal
Adjusting Entries 05 02 Entries
Hotel Invoice
Every transaction must be recorded, and should be backed by at least one (1)
source document as the evident of the transaction
The source of document(s) of a transaction must records into a journal entry with
the following characteristics :
• Consist of at least record two (2) components in balance accounting equation
(i.e. debits = credits)
• record the date, a narration and the account numbers and later on to be posted
to ledger accounts regularly, therefore:
✓ A company need a “Chart of Accounts” to classify each transaction into a
journal entries.
• Transaction 1: On 3 Jan 2020, Albert, the executive sales officer of PT PIS has sold a set of
diamond rings to a “Middle East customer” amounted to IDR 200 million in a luxurious hotel
located at Nusa Dua, Bali .The cost of good sold of the diamond rings was IDR 120 Million.
• Transaction 2: Albert has stayed 4 nights at the luxurious hotel and also spend some cost in the
hotel during his stays. Total accommodation costs in the luxurious hotel charged to Albert during
his check-out on 5 January 2020 were IDR 20 million.
CHAPTER 2: ACCOUNTING AND FINANCIAL STATEMENTS 35
BASIC ACCOUNTING PROCESS
STEP 3 – GENERAL LEDGER – Cont’d
• Records all addition and deduction of each accounts in financial statements
• An entity’s complete recording of account movement at one point of time or in a period of time.
Posting to General Ledger
(in IDR Thousand)
▪ Adjusting entries are general journal (not a transaction journal) to adjust the
trial balance, which one side of the entry affects or creates a balance sheet
item; and the other side affects or creates a revenue or expense account.
• Unearned revenue and prepaid expenses are already recorded in the
accounts.
• Accruals (expenses and revenues), depreciation, and doubtful debts are
not yet recorded.
▪ An ADJUSTED Trial Balance is prepared after adjusting entries posted
Is the final stage of basic accounting process that generated to fulfill the variety
needs of the financial statement users.
There are five (5) types of financial statements, as follows:
1. Income Statement
2. Statement of Changes in Stockholders’ Equity
3. Balance Sheet
4. Statement of Cash Flow
5. Notes to Financial Statements
Terminology Definition
SALES/REVENUE All receipts of a company that result from the transfer of ownership of goods from
the company to another party (presented in net basis after deduction of return and
discount)
COST OF GOOD SOLD All goods and services acquired for later sale
GROSS PROFIT The difference between sales and cost of good sold
OPERATING EXPENSE All expenses that support the company operation, includes: rent, salaries,
telephone bills, advertising and other
OPERATING PROFIT The difference between the gross profit to operating expenses
OTHER INCOME (EXPENSE) All Income & expenses from non operating activity or services
NET PROFIT The difference between operating profit to other income and/or expenses
(presented before or after deducted by tax)
CHAPTER 2: ACCOUNTING AND FINANCIAL STATEMENTS 41
TYPE OF FINANCIAL STATEMENTS
INCOME STATEMENT – Cont’d
PT HM SAMPOERNA Tbk AND SUBSIDIARIES
INCOME STATEMENTS
Ended December 31, 2017, 2018 and 2019 in (IDR millions)
2017 2018 2019
Sales 99.091.484 106.741.891 106.055.176
Cost of Goods Sold (74.875.642) (81.251.100) (79.932.195)
Gross Profit 24.215.842 25.490.791 26.122.981 (A)
Operating Exenses
Selling (6.258.145) (6.296.611) (6.621.032)
General and Administrative (1.846.352) (2.312.252) (2.424.862)
Other-net (7.784) 105.899 36.992
Total Operating Exp. (8.112.281) (8.502.964) (9.008.902) (B)
Operating Profit 16.103.561 16.987.827 17.114.079 (C) = (A) – (B)
Other Income (Expense)
Net Interest Income (Expense) 791.245 973.442 1.145.344 (D)
Earning* Before Taxes (EBT) 16.894.806 17.961.269 18.259.423 (E) = (C) + (D)
Taxes Expenses (4.224.272) (4.422.851) (4.537.910) (F)
Earning* After Tax (EAT) 12.670.534 13.538.418 13.721.513 (G) = (E) + (F)
* Note: Earning = Net Profit
CHAPTER 2: ACCOUNTING AND FINANCIAL STATEMENTS 42
TYPE OF FINANCIAL STATEMENTS
CHANGES IN STOCKHOLDERS EQUITY STATEMENT
A statement that summarizes the activities that resulted changes between two dates of
the owners’ equity portion of the balance sheets at the beginning of the period and the
owner’s equity portion of the balance sheets at the end of the period.
A=L + E
Assets : all cash, marketable securities, account receivables, inventory, prepaid
expenses, investment and fixed assets owned by the company.
Liabilities : amounts owed to other companies or individuals through business
suppliers/vendors payable, taxes payable, banking or capital markets debt
issuance (bond).
Equity : It is also called "net worth". This is what remains after deducting
liabilities from your assets. The two main contributors of this account is paid-in
capital and retained earnings.
BALANCE SHEET
Assets and liabilities:
• Are displayed in terms of object/group providing or requiring sacrifice of economic benefits
• Must be classified into current and non-current categories:
Other Current Assets 2.615.744 1.581.572 932.442 Total Current Liabilities 6.482.969 8.793.999 12.727.676
Total Current Assets 34,180.353 37.831.483 41.697.015 Employee Benefit Liab. (LT) 2.239.240 2.202.332 2.129.454
Other Long-Term Liabilities 305.869 247.836 365.946
Total Liabilities 9.028.078 11.244.167 15.223.076
Owner's Equity
Non-Current Assets Paid-in Capital 20.914.476 21.011.423 21.033.348
Fixed Asset (net) 6.890.750 7.288.435 7.297.912 Retained Earnings 12.581.976 13.730.669 14.029.964
Other Non-Current Assets 2.069.960 1.482.502 1.907.879 Others 616.533 616.161 616.418
Total Non Current Assets 8.960.710 8.770.937 9.205.791 Total Owner's Equity 34.112.985 35.358.253 35.679.730
CHAPTER 2: ACCOUNTING AND FINANCIAL STATEMENTS
Total Assets 43.141.063 46.602.420 50.902.806 Total Liabilities and Equity 43.141.063 46.602.420 50.902.806
TYPE OF FINANCIAL STATEMENTS
CASH FLOW STATEMENT
A statement that summarize how a company has
generated and used cash. Since the revenue and cash
recognition are not based on the receipt or payment of
cash, the income statements tend to obscure the cash
inflows and outflows.
1. Operating Activity,
2. Investing Activity,
3. Financing Activity, and
4. Supplemental Information.
Excise Tax Paid (Biaya cukai yang dibayar) (57.699.942) (59.128.307) (61.538.037)
18.593.693 23.190.850 20.735.735
Income Tax receive (paid) (4.337.944) (4.035.809) (4.630.741)
Interest and Financing charges receive (paid) 1.120.566 1.038.442 1.040.973
Net cash provided (used) in operating activities 15.376.315 20.913.483 17.145.967
Investing Activities
Sale of fixed assets 23.915 137.904 29.724
Acquisitions of fixed assets (1.151.713) (989.217) (959.537)
Increase/Decrease in financial assets and related parties receivables 746.749 1.195.790 873.103
Net cash provided (used) in investing activities (381.049) 333.591 (56.710)
Relates to the notes attached to balance sheet and income statement, explaining
details of changes from one year to another
FINANCIAL
STATEMENTS
In principle it complements the balance sheet and income statement, shows the
detailed accounting information to provide more accurate picture
Qualified, auditor finds that reports Adverse, auditor finds that the
2 conform to GAAP, except in just a few 4 statements do not fairly represent the
areas. For these areas, the auditor cannot entity’s accounts. The financial
assert conformance statements do not comply with GAAP.
The greater reputation of the accounting firms usually the better information provided in the audited financial
statements. Some of the reputable accountants are called the “BIG 4”:
Other than the Big 4 Accountants, bank can consider public accountants that are registered in regulator list (OJK)
54
“Revenue is vanity, profit is sanity, but
cash is king”
56
CHAPTER 3: RATIONAL OF BORROWING NEEDS AND DEBT SIZING
TOPICS TO BE DISCUSSED
57
COMPANY OPERATING CYCLE AND WORKING CAPITAL
OPERATING CYCLE BY TYPE OF COMPANY
In general, we can divide business into three (3) types of categories as follows:
Manufacturing Company
Purchase Inventory Used of Inventory Finish the productions Sell the Finish Good (A/R)
(Raw Materials) into production & keep it in the warehouse
(Work in Process/WIP) (Finish Goods)
Trading Company
Purchase Inventory Keep the purchased Inventory Sell the Finish Good (A/R)
(finish good) in the warehouse
(Finish Goods)
Service Company
OPERATING
CYCLE
Purchase Inventory Used of Inventory Finish the production Sell the Finish Good
into production & keep it in the warehouse (A/R)
(Raw Materials) (WIP) (Finish Goods)
❷ ❻ WORKING
CAPITAL
REQUIREMENT
(increase as business
Payment of Inventory Received Payment cycle progresses)
Purchased from customer
❷ The cash transaction starts when a company paid its payable on inventory purchased
❻ The cash transaction end when the customer paid the account receivable
CHAPTER 3: RATIONAL OF BORROWING NEEDS AND DEBT SIZING 62
COMPANY OPERATING CYCLE AND WORKING CAPITAL
OPERATING CYCLE & WORKING CAPITAL NEEDS – Cont’d
❶ ❸ ❹ ❺
Purchase Inventory Used of Inventory Finish the production Sell the Finish Good Account
(Raw Materials) into production & keep it in the warehouse (A/R) Receivables
(WIP) (Finish Goods)
DAYS
❷ ❻
Account
Payable CASH CYCLE DAYS
Payment of Inventory Received Payment
DAYS Purchased from customer
Cash Cycle Days X Daily sales (or Daily COGS) = Working Capital Needs (Rough calculation)
Cash Cycle Days = Inventory Days + Account Receivables Days – Account Payable Days
2019 2020
SALES IDR 12,000,000 IDR 18,000,000
C0GS IDR 6,000,000 IDR 9,000,000
30
Account Receivable (30days) IDR 1,000,000 ……………………… (?) × 𝐼𝐷𝑅 12 𝑚𝑖𝑜
360
60
Inventory (60 days) IDR 1,000,000 ……………………… (?) × 𝐼𝐷𝑅 6 𝑚𝑖𝑜
360
Account Payable (30 days) (IDR 500,000) ……………………… (?) 30
× 𝐼𝐷𝑅 6 𝑚𝑖𝑜
360
WORKING CAPITAL IDR 1,500,000 ……………………… (?)
Note: The above steps may not be relevant for other reason of CAPEX needed.
PT Subur Jaya (“the Company”) yearly sales increase 10% per year in average in
Case Study the last five (5) years (from 2014-2019).
The company recorded 50% of its production capacity by the end of 2014, and
by the end of 2019 the production capacity had reached to 75%.
Please Calculate !
Cash Flow
Revenue XXX
Cash COGS** (XXX)
If it is not – It might be over Cash Gross Profit XXX
leveraging (debt financing) or the Cash OPEX** (XXX)
CAPEX is not profitable/feasible* Operating Cash Flow (EBITDA) XXX
Interest Expense – Existing Debt (XXX)
*We may check to leverage ratio and debt repayment – New Debt (XXX)
capacity ratio Debt (Loan) Installment / Repayment (XXX)
**COGS & OPEX after deducted with Depreciation dan
Amortization expenses Net Cash Flow XXX
72
CHAPTER 4: MACRO, INDUSTRY AND BUSINESS ANALYSIS
TOPICS TO BE DISCUSSED
▪ Overview of Macro Economic and Other Macro Factors
Analysis
• Political Factors
• Macro Economic Trends
• Social Factors
• Technological Factors
▪ Debtor’s Industry Analysis
• Porter’s Five Forces Analysis
▪ Debtor’s Business Analysis
• General Business Characteristics and Risks
• Business Life Cycle – characteristics & financing
• Value Chain Assessment
• Type of Borrower Ownership
• BOC, BOD, and Staffs
73
OVERVIEW OF MACRO ECONOMIC AND OTHER MACRO FACTORS ANALYSIS
Thailand; 520
600
Singapore; 382
Malaysia; 370
400
Philippines; 355
Vietnam; 255
200
0
2015 2016 2017 2018 2019
Indonesia Malaysia Singapore Thailand Philippines Vietnam
Source: Trading Economics
• GDP measures the economic output of a country. Indonesia GDP is USD 1.126 Billion in 2019.
• The Year on Year (YoY) GDP growth is a change in the value over one year. It is done by comparing a specific
period’s gross domestic product to previous period. GDP growth rates measure how fast the economic
growth is. Based on Trading Economics, Indonesia’s GDP growth was recorded 4,97% per January 2020.
*Prediction of Real GDP Growth by IMF
CHAPTER 4: MACRO, INDUSTRY AND BUSINESS ANALYSIS 77
OVERVIEW OF MACRO ECONOMIC AND OTHER MACRO FACTORS ANALYSIS
KEY MACRO ECONOMIC INDICATORS - GDP
REAL GDP GROWTH (IN %)
Malaysia; 9
8 Indonesia; 8,2
Philippines; 7,6
Vietnam; 7
4 Thailand; 6,1
Singapore; 3
0
-4
-8
2015 2016 2017 2018 2019 2020* 2021*
Real GDP Growth 2015 2016 2017 2018 2019 2020* 2021*
Indonesia 4,9 5 5,1 5,2 5 0,5 8,2
Malaysia 5 4,4 5,7 4,7 4,3 -1,7 9
Philippines 6,1 6,9 6,7 6,2 5,9 0,6 7,6
Singapore 3 3,2 4,3 3,4 0,7 -3,5 3
Thailand 3,1 3,4 4,1 4,2 2,4 -6,7 6,1
Vietnam 7 6,7 6,9 7,1 7 2,7 7
*Prediction of Real GDP Growth by IMF CHAPTER 4: MACRO, INDUSTRY AND BUSINESS ANALYSIS 78
OVERVIEW OF MACRO ECONOMIC AND OTHER MACRO FACTORS ANALYSIS
KEY MACRO ECONOMIC INDICATORS - INFLATION
6
INFLATION RATE (IN %)
5
Vietnam; 4,3
4
Indonesia; 3
3 Philippines; 3
Malaysia; 2,8
2
Singapore; 0,9
1
Thailand; 0,7
0
-1
-2
Inflation rate, average consumer prices 2015 2016 2017 2018 2019 2020* 2021*
Indonesia 3,4 3 3,6 3,2 2,6 3,1 3
Malaysia 2,7 1,7 3,5 0,2 1 0,1 2,8
Philippines 0,7 2,2 2,9 5,1 2,5 2,6 3
Singapore -0,6 0,2 0,4 0,5 0,8 -0,4 0,9
Thailand -0,9 1,1 0,8 0,4 0,9 -1,1 0,7
Vietnam 0,6 4,7 2,6 3 5,2 2 4,3
*Prediction of Inflation Rate by IMF
CHAPTER 4: MACRO, INDUSTRY AND BUSINESS ANALYSIS 79
OVERVIEW OF MACRO ECONOMIC AND OTHER MACRO FACTORS ANALYSIS
KEY MACRO ECONOMIC INDICATORS – INTEREST RATE
May 2018 Sept 2018 Jan 2019 May 2019 Sept 2019 Jan 2020 May 2020
Source: Trading Economics
• Foreign exchange is the conversion rate of one currency into another currency.
CHAPTER 4: MACRO, INDUSTRY AND BUSINESS ANALYSIS 81
OVERVIEW OF MACRO ECONOMIC AND OTHER MACRO FACTORS ANALYSIS
SOCIAL FACTORS
Social factors are include among others the aspects of:
• Population Growth,
• Age Distribution,
• Health,
• Education,
• Social Mobility,
Social Factor
• Culture,
• Religion, and
• etc.
Assess how the social factor changes affected sales, expenses, competitiveness and
prospect of a company.
PEST
Political situation
Economic situation
Debtor’s Industry Debtor’s Business Performance
Social activity
Technology Influence Financial Impact
How we response?
85
DEBTOR’S INDUSTRY ANALYSIS
PORTER’S FIVE FORCES ANALYSIS
Is a tool for analyzing the competitive intensity of an industry that will determine the attractiveness and risk
Is it easy to enter into the industry?
MATURITY (BUSINESS • Mature firm • Mature firm with some • Emerging firm with
LIFE CYCLE) • Growth at reasonable rate shake-out or weaker explosive growth, or
competitiveness, or • Declining saturated firm
• Emerging firm with steady
rapid growth
PRODUCTS • Many products • Several product • Single/very limited product
DIVERSIFICATION • Different customer • Limited customer • Single customer segment
segment/industry segment/industry industry
• Diversified products take • 1 – 2 products take major • Single product have
contribution on profit contribution on profit dominant contribution on
profit
Debt Financing
Financing • Own/ equity • Own/ equity financing; • Own/equity • Own/ equity financing; • Own/ equity
financing • Debt financing financing; • Debt financing financing;
• Debt financing
Investors • Own-selves and • Own-selves and close • Own-selves; • Own-selves; • Buy-out firms;
close friends/ friends/ family • Venture capital/ • Buy-out firms; • Distress-asset
family members members; Private Equity; • Banks; management
• Angel investors • Angel investors and • Banks; • Public
venture capital • Public/ IPO
CHAPTER 4: MACRO, INDUSTRY AND BUSINESS ANALYSIS 89
DEBTOR’S BUSINESS ANALYSIS
VALUE CHAIN ASSESSMENT
Is a concept to assess the business process and infrastructure within a company to measure how efficient they
are and how they did their primary and support activities
Note: It is important to know the controlling shareholders deeply in order to to understand their Character (historical background check through SLIK checking,
trade checking, and Family/Personal Life Assessment can be used to assess debtor’s reputation)
CHAPTER 3: MACRO, INDUSTRY AND BUSINESS ANALYSIS 91
DEBTOR’S BUSINESS ANALYSIS
BOC, BOD, AND STAFFS
Political Analysis:
Macroenvironment Economy
Social
Technology
Weighted Average Risk Score: -
Industry analysis L LM M MH H CONCLUSION
TNE Analysis:
TSP
Industry BPS
BPC
CR
Weighted Average Risk Score: -
Business analysis L LM M MH H CONCLUSION
Size Analysis:
Maturity
Product Diversification
Business Value Chain
Ownership
Management (BOC & BOD)
Human Resources (Staff)
Weighted Average Risk Score: -
”Carefully consider the path for your feet,
and all your ways will be established”
95
CHAPTER 5: FINANCIAL STATEMENTS ANALYSIS
TOPICS TO BE DISCUSSED
▪ Common Size Analysis
• Overview
• Balance Sheet
• Income Statement
▪ Financial Statements Ratio Analysis
• Leverage Ratio
• Activity Ratio
• Liquidity Ratio
• Profitability Ratio
• Debt Repayment Capacity ratio
▪ Financial Projection Analysis
• Financial Projection
▪ Debtor’s Bank Statement Assessment
• Company Business and Bank Statement Pattern
• Bank Statement Fraud and Accuracy
• Repayment Capacity and Bank Statement
▪ Individual Debtor Financial Analysis 96
COMMON SIZE ANALYSIS
OVERVIEW
• Trend Analysis, the growth (or shrinkage) of Assets and its financing
sources (liabilities and equity)
Net Profit Before Tax (NPBT) 16,894,806 17.0% 17,961,269 16.8% 6.3% 18.259.423 17,2% 1,7%
Taxes Expenses (4,224,272) -4.3% (4,422,851) -4.1% -4.7% -4.537.910 -4,3% 2,6%
Net Proft After Tax (NPAT) 12,670,534 12.8% 13,538,418 12.7% 6.8% 13.721.513 12,9% 1,4%
Common Size analysis on Income Statements is very easy to understand and provide us direct
insights about certain important area, among others:
• Detect Unusual Items, explore the largest changes for further analysis;
is this one-off items or due to irregularities
• Debt/Equity (DER)
• To measure the capacity of a company debt, it’s borrowing capacity
Leverage • Debt/Asset (DAR)
• Equity Multiplier (EM) and may impact to debt repayment capacity
• Current Ratio
• To measure the capability of a company to service its short term
Liquidity • Quick Ratio
• Cash Ratio debt
• EBITDA Margin
Debt Repayment • EBITDA Coverage • To measure the ability of a company to provide cash for their debt
Capacity • ISCR repayment
• DSCR
Total Equity
𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒊𝒍𝒊𝒕𝒊𝒆𝒔∗
DER = 𝒙 𝟏𝟎𝟎%
𝑬𝒒𝒖𝒊𝒕𝒚 𝑵𝒆𝒕 𝒘𝒐𝒓𝒕𝒉
* For more relevant credit analysis, some banks are using interest bearing debt
Total Equity
𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒊𝒍𝒊𝒕𝒊𝒆𝒔∗
DAR = 𝒙 𝟏𝟎𝟎%
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
* For more relevant credit analysis, some banks are using interest bearing debt
• Also calculated as A/R days – how many days it takes for A/R to Assets (NCA)
Total Equity
be converted into cash.
• Also calculated as Inventory days – how long inventory was kept Assets (NCA)
Total Equity
before it is sold.
Current Liabilities
are debts/payables that will mature or are expected to be paid in cash within
12 months (a year) or less
• Shows excess of the most liquid current assets over current Balance Sheet
liabilities. Total Liabilities
Total Asset
• Measures the ability to pay current liabilities without reliance on • Current Assets
• Current Liabilities
liquidation of inventory. ✓ Cash
• Non-current
✓ Marketable
• Cash, Marketable Securities & Net Account Receivables are the most Securities
Liabilities
Cash, Marketable Securities & Net Account Receivables are considered as the most
liquid current assets
CHAPTER 5: FINANCIAL STATEMENTS ANALYSIS 112
FINANCIAL STATEMENTS RATIO ANALYSIS
LIQUIDITY RATIO – Cont’d
Balance Sheet
Cash Ratio Total Liabilities
Total Asset
• The most conservative liquidity ratio. • Current Assets
• Current Liabilities
✓ Cash
• Only calculates cash and marketable securities to cover short- ✓ Marketable
• Non-current
Liabilities
term liabilities. Securities
✓ Net A/R
✓ Inventory
✓ Others CA
𝑪𝒂𝒔𝒉+𝑴𝒂𝒓𝒌𝒆𝒕𝒂𝒃𝒍𝒆 𝑺𝒆𝒄𝒖𝒓𝒊𝒕𝒊𝒆𝒔 • Non-current Total Equity
Cash Ratio = × 𝟏𝟎𝟎% Assets (NCA)
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Gross Profit Margin (GPM) Operating Profit Margin (OPM) Net Profit Margin (NPM)
• A key ratio to measure return from every dollar sales made by the company.
• Sales is a net sales or gross sales minus discount, return and allowance
Income Statement
𝑵𝑷𝑨𝑻
ROA = × 𝟏𝟎𝟎% Revenue/Sales XXX
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
COGS (XXX)
Gross Profit XXX
Operational Expenses (OPEX) (XXX)
Operating Profit XXX
Others (e.g. interest) (XXX)
Net Profit Before Tax (NPBT) XXX
Tax (XXX)
Net Profit After Tax (NPAT) XXX
EBITDA MARGIN
• EBITDA Margin is to measure approximate ‘cash profit’ generated
from sales. Cash Flow
• EBITDA Margin can provide clear view of a company’s “operating Revenue/Sales XXX
cash flow” in relative to its sales. Cash COGS (-/- Dept & Amort) (XXX)
Gross Profit XXX
Cash OPEX (-/- Dept & Amort) (XXX)
𝑬𝑩𝑰𝑻𝑫𝑨 EBITDA XXX
EBITDA MARGIN = × 𝟏𝟎𝟎%
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
INTEREST SERVICE COVERAGE RATIO (ISCR) DEBT SERVICE COVERAGE RATIO (DSCR)
EBITDA EBITDA
x 100% x 100%
Interest on Total Debt Interest on Total Debt + CPLTD (previous year)
Indicate the ability to cover interest obligation Indicate the ability to cover both principal
from its debt (represent by Current Position of Long Term
Debt/CPLTD Previous Year) and interest of all
interest bearing (current year interest expense)
SENSITIVITY ANALYSIS
Analysis to assess the changes of financial projection because of one input (variable).
Income Statements
Balance Sheets
Company Business and Bank Bank Statement Fraud and Repayment Capability and
Statement Pattern Accuracy Bank Statement
E.g. During peak/festive season, a company would record high sales and also high
cash flow balance some time after the sales (after the A/R paid).
• Cash received from sales (credit balance) and cash paid for cost of
goods sold and operating expense (debit balance) should be recorded
in the bank statements.
• Net of cash received stay in the bank statement or transform into
time deposits or other investment product can be measured as
the cash produce from debtor business.
Example:
Andy is an employee who has a total monthly disposable income of IDR 5,000,000 applying for
unsecured loan to XYZ Bank. Currently, Andy already has a loan to Bank ABC where he has to repay
Rp 500 thousand/month. If XYZ Bank has a maximum DBR policy for debtors of 30%, what is the
maximum debts installment that can be given by Bank XYZ for Andy?
Answer:
𝐷𝑒𝑏𝑡𝑠 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡
30% =
𝑅𝑝 5 𝑚𝑖𝑙𝑙𝑖𝑜𝑛
Max debts installment = Rp 1,5million
Max debts installment given by Bank XYZ = Rp 1,5million – Rp 0,5million = Rp 1 million
130
CHAPTER 6: COLLATERAL ANALYSIS
TOPICS TO BE DISCUSSED
▪ What is Collateral ?
▪ Type of Collateral
▪ Characteristic of Good Collateral
131
COLLATERAL ANALYSIS
WHAT IS COLLATERAL
DEFINITION
Collateral is an asset that a borrower offers as a way for a lender to secure the loan*
*Therefore, loan to Value/LTV is important factors for consumer loan.
FUNCTIONS
• The ‘second way-out’ when the ‘first way-out’ (cash flow) turn into ‘sour’
• Reduce the maximum loss (loss given default/LGD) from collateral sales recovery*
* It depends on the type, value, and time pressure to sell the collateral
BANK ASSESSMENT
• Value of the collateral (> Rp 10 billion)
• Validity of legal right of the collateral
• Insurance coverage and ‘bankers clause’ for certain collateral
Cash &
Land & Building Heavy Equipment
Marketable Securities
136
CHAPTER 7: LOAN AGREEMENT
TOPICS TO BE DISCUSSED
137
LOAN AGREEMENT
MAIN TERMS AND CONDITIONS
▪ Provide legal standing and protection for both parties (lender and borrower)
in relation to lending and borrowing activities.
▪ Must be signed by Authorized persons from both parties (as stipulated in their
Article Association), and clearly states the terms and condition/’T&C’ for both
parties
Main T&C in the Loan Agreement:
1. Definition: define the key Term used in the Loan Agreement
2. Loan Feature:
✓ Amount & currency (single or multi currency)
✓ Proposes: working capital &/ revolving loan or investment/term loan
✓ Interest: fixed vs floating
✓ Repayment schedule/tenor: short-term (1 year), medium-term (1-5 years),
and long-term (> 5 years)
✓ Security: secured or unsecured/clean basis
7. Remedies:
What shall be done if EoD is triggered (e.g. financial covenant breach, etc)
✓ Immadiate payment of the delinquent (e.g. in 5 working days)
✓ Top-up additional collateral
✓ Off-set borrower’s deposit held by lender
145
CHAPTER 8: LOAN MONITORING
TOPICS TO BE DISCUSSED
▪ Overview of Loan Monitoring
▪ Internal Factors
• Financial Warning Signs
• Debtor Warning Signs
▪ External Factors
• Third-Party Warning Signs
• Macro Economic and Industry Warning Signs
146
OVERVIEW OF LOAN MONITORING
OVERVIEW OF LOAN MONITORING
▪ This “Early Warning Signs” can be set as part of Key Risk Indicator (red flag) to
give a sign of changes of the bank credit risk.
▪ Bank management ( and credit committee) should have the report and take
early mitigation or remediate action.
1. Difficult to contact
2. Debtor’s experiencing family problems
3. Debtor is sick
4. Debtor develops new products outside of his core business
5. Debtor sells the fixed assets related to his business activities
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