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Mapping qualitative analysis with financial numbers :

Financial risks are mapped against Balance sheet, income and cash flow statements of ---------- to identify key risks Risks Liquidity risk WATCH OUT CORE VS NON CORE ACTIVITIES SUPPORTING LIQUIDITY Financial factors Profit & Loss Accounts Sales growth Gross margin growth Operating profit growth Net profit growth Balance Sheet Current ratio Quick ratio NWC ratio (i.e.) A/R ratio A/P ratio Inventory ratio Cash flow statement Cash from trading activity Gross cash from operations Net cash after operation Cash after debt amortization Financing risk WHEN NCAO/CADA IS NEGATIVE, BORROWING REQUIRED TO REPAY Profit & Loss Accounts Interest Financial charges Balance Sheet ST debt CPLTD LT debt Equity Directors loan Gearing Leverage EBITDA DSCR Cash flow statement Surplus cash from operations (NCAO/CADA) Ability to service interest, current maturities Refinancing borrowing to repay, if NCAO/CADA is negative Mis match in cash flows Risk Level

Foreign exchange risk

Profit & Loss Accounts Analysis of sales and purchase Exposure to FX risk Hedged or not hedged Any FX gain/loss booked translation Vs transaction risk

Balance Sheet A/R Vs A/P Currency of debt Vs. operation of business ST Vs LT hedging policy Cash flow statement Impact of transactional loss Impact of translation loss Interest rate risk Cash flow strength to counter interest rate vulnerability Profit & Loss Accounts Cost of debt Fixed Vs floating Local Vs FX Balance Sheet ST Vs LT debt Fixed Vs floating Local Vs FX Cash flow statement Ability to pay interest Interest coverage ratio Commodity risk Companies relying commodities Profit & Loss Accounts Commodity exposure Impact on bottom line Ability to pass on pricing to buyers Balance Sheet Inventory management Inventory ratio Impact on A/P & A/R Cash flow statement Impact Counter party risk Creditworthiness of counter parties Profit & Loss Accounts Evidence of goods returned Bad debt provision/write offs Balance Sheet A/R management Bad debt records Cash/investment in difficult jurisdiction Cash flow statement

on

Equity risk Risk associated with equity exposure

Weakening cash flows due to poor A/R management I

Profit & Loss Accounts Income from investments/associates/subsidiaries Dividend pay out policy Balance Sheet Performance of investment Cash flow statement Ability to pay dividend out of operating cash flows

Contingent risk

Profit & Loss Accounts Possible provisions Possible losses Balance Sheet Impact if called off Impact on net worth Adjusted gearing Cash flow statement Impact on operating cash flows Ability to absorb

Key Outcome

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