finance analysis and ratio

Commercial Bank Management Project Fall 2017-2018


Student Learning Outcome:

This is a practical group project to help students in:

(1) Analyzing the lending policies applied in commercial banks.

(2) Team work

(3) Financial Ratio Analysis

(4) Due Date to submit project: Tuesday, Dec 24, 2017 @ 11:00 am: Hard and Soft Copy.


Section (1): Loan Application Project

Company (X) is asking for a SR 45 million line-of-credits for a period of 18 months.

**This company is promising to repay the loan based on an assumption of a strong base of liquid assets, inventory and sales for the coming 3 years and an efficient management of all its expenses and short-term (current liabilities) –due to an increased demand on its products, strong pricing strategies, increased market share and high level of accounts receivable during the last 3 years which is and will reflect in increased sales and revenues.

**Company (X) has an outstanding loan with another bank = SR 10 million since 5 years and it matures this current year (current year is the last year of your analysis). The loan remaining maturity is end of the current year (current year is the last year of your analysis). At the end of the current year, the company must pay back SR 250,000 of its long-term debt (annual interest payments) and SR10 million (the principal amount).

**Company (X) is unhappy with its present banking relationship.

Section (2): General Requirements & Guidelines:

1. Group of 4-5 students.

2. Choose a company that operates inside Saudi Arabia.

3. In this project, you will assume that you are a team of Bank Loan Officers to whom this company (X) is applying its above loan application to.

4. The company must provide you with a good background regarding its historical background, its business segment, its operations, its products and services, its market share and major competitors in the Saudi Market (if any)

5. The company is required to submit to your Bank TWO major financial statements: Balance Sheet Statements and Income Statements of at least 3 consecutive years (if 5 years better).

6. Optional: The Company may also submit to the Bank Loan Officer(s) the latest year Cash-Flow statement (if available). (the latest year pertains to the last year of your analysis)

7. The Bank is required to analyze all the submitted financial statements: Balance Sheet, Income statements and Cash Flow (optional) statements to make a decision about the loan applying the methodology, tools and techniques discussed in the course chapters about business loans.

8. All the financial statements used in analysis of the project must be enclosed in the submitted copy of the project as complete original statements inclusive of the attached notes. It will be enclosed in the appendix section of the project (hard copy only).

9. It is not advisable (but you may use) to use consolidated financial statements because it does not reflect the actual financial status of your company as the consolidated financial statements refer to the financial status of the mother holding company.

10. Your financial analysis must show the detailed equations + chosen numbers or accounts of all financial ratios used in the project analysis. The equations and mathematical work could be enclosed in the appendix section or as a footnote but not as a major part of the project analysis or presented in Excel sheet. Refer to chapter (17) in your Text Book and follow a similar display of analysis of data tables in your project.

11. All financial ratios and tables presented in the project must be accompanied with your analysis or comments. Any ratios or numbers provided unexplained will lose grades.

12. The last section in your project must present a complete summarized table of all financial ratios used in the analysis to make the final decision( as explained to you in chapter 17 in your course)

13. Your conclusion and recommendation sections must include a clear statement about details of the decision taken by the Bank. If loan is approved, draft details about the loan contract/agreement + covenants/collateral must be supplemented.

14. If the Loan is not approved, explanations need to be provided as well.

15. Some companies submit consolidated financial statements of their Holding companies. It is not advised to use consolidated financial statements as these are not reflective of the company that you have chosen. However, if you want to use consolidated financial statements that are related to the company of your choice, make sure that you are using consolidated financial statements for all the years of your analysis.

16. The selected financial statements must be as detailed as possible (not summarized) because this will help you to apply a comprehensive financial ratio analysis to make up a sound conclusion.

17. It is highly advised that the chosen financial statements are expressed in English, however, Arabic financial statements can also be used for your analysis provided that you are comfortable using it. However the analysis part of these Arabic financial statements must be written in English language.

18. Due date to submit the project is Dec 24, 2017. All projects must be typed and includes the following sections:

** Cover page

** Page stating the name of the student who worked on the different sections of the project

**Purpose of the project/paper

** Introduction about the company.

** Details about the loan application (section 1 above)

** Complete financial ratio analysis of the loan application of the company.

** Final Decision

** Conclusion

**References (if any)

** Appendix (must include the complete financial statements used in the analysis).

19. No two groups can choose the same company for analysis. Approval of course instructor must be given to group members on the name of the chosen company for analysis. Without instructor approval, the project title and work will not be accepted and you will lose grade on the course project.

20. You can view the rubric used to correct these projects as posted on BB.

21. Soft and hard copy must be submitted of the project on due date. Soft copy/hard copy will be submitted to Ms Hadeel Gandil.

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