Who is a Credit Analysis
Credit Analysis refers to studying the credit-worthiness of a borrower – it could be a large or a small firm or even an individual. For instance, this sort of analysis could be required by a bank when it needs to examine whether a loan would be repaid by a borrower, or by a financial investor who needs to check whether a corporation would honor the interest and principal repayment on bonds issued by it. Process of Credit Analysis
• Firstly, credit analysts check the historical records of the borrower, the market reputation or any negative news flows to assess the repayment capability.
• Next, in order to perform effective credit analysis, the analyst should essentially be skilled at studying the financial statements of a firm, and analyzing the ratios inferred from the statements.
• Further, the analyst also needs to check whether the borrower will have sufficient free cash flows to honor his obligations.
• And finally, the analyst uses statistical tools to assign a risk rating to the borrower, and also checks the amount of potential loss to the lender in the event of default. Credit Analysts can find opportunities in:
• Credit Departments of lending companies such as NBFC
• Credit Rating companies
• Consultancy firmsSkills Required:
• The minimum educational requirement is a bachelor's degree in finance, accounting.
• Knowledge of statistics, economics, ratio analysis, etc. is necessary.
• In-depth knowledge of Financial Modeling is very handy in preparing valuation reports.IMS Proschool’s Programs for careers in Credit AnalysisFinancial Modeling
Financial Modeling involves studying historical information (including credit profile), levels of income and free cash flows over the past few accounting periods, projected financial situation going forward, studying ratios inferred from financial statements (in case of a firm) and even status of projects undertaken (to determine whether the projects have been sound investments or not). The ultimate objective of all this is the projection of the firm’s future financial status and, accordingly, the assignment of a credit rating, which will determine the level of confidence investors have in the firm. View more
.Post Graduate Diploma in Financial Analysis and Modeling
This program, firstly, includes Financial Reporting Analysis which deals with inferring ratios from historical financial reports. These ratios can then be benchmarked longitudinally or by industry standards to arrive at a relative fiscal position of the firm, and a credit rating can be given accordingly. The program also involves valuation of firms and M&A Advisory, which can be a very important guide to the future of the corporate scenario in the country. Credit Research is also an integral part of the program’s syllabus. View more info on Financial Analysis & Modeling course