CAM ratios Flashcards
What is sales growth?
(Current Period -Prior Period Sales )/prior period sales * 100
Annual rate change in sales
Starting point assessing financial risk and cash flow
Rapidly increasing sales require higher levels of operating assets and more cash is required to support those expanding assets
What is gross margin?
(Gross Profit/sales) *100
What is operating expense ratio?
(Operating expenses - interest - tax - amortization)/sales) * 100
Represents portion of sales relating to selling, general and admin expenses
Calculated as total selling, general and admin expenses/net sales
Lower ratio is better
Business does better job controlling expenses, cash flow improves and risk declines
What is debt service coverage ?
A measure of cash available to service current and proposed debt obligations
EBITA - corporate distribution (dividends) to total interest expense and scheduled principle payments in respect to funded debt
1.25 EBITA to debt obligation minimum required
What is funded debt/EBITA?
For any fiscal period the ratio of funded debt to EBITA less Corporate distribution (dividends) divided by adjusted EBITA. Shows how reliant the business is on others to operate
What is funded debt leverage ratio?
Uses for under 1 million
Means funded debt divided by total assets
What is current ratio?
Means for any fiscal period, the ratio of current assets to current liabilities
Prepaid stay in current assets for current ratio
this ratio is rated highest for under 1 million
What is debt to tangible net worth?
Total liabilities/tangible net worth
Equity - unpostponed shareholder loans and intangibles and intangibles = tangible net worth
Subtract prepaid expenses, questionable receivable, leasehold improvement from TNW as they are not tangible
Postponed shareholder loans would not be added as liability
What is EBITA ?
Earnings before interest, tax,, depreciation, amortization or
Net income from continuing operations (excluding extraordinary gains or losses) plus to extent deducted in deterring net income, interest, income taxes accrued during, and depreciation, depletion and amortization expenses deducted for period
What is EBITA margin?
Assessment firms operating profitability as percentage of total revenue
What is corporate distribution?
Means any payment to any shareholder, director, or to any associate or holder of subordinated debt of the borrower, including without limitation, bonuses, dividends, salaries to officers or other employees in the ordinary course of business
What is equity?
Total of share capital, (excluding preferred shares redeemable within one year) contributed surplus and retained earnings plus postponed debt
What is funded debt?
For fiscal period - all obligations for borrowed money which bears interest or to which or to which interest is imputed plus without duplication all obligations for the deferred payment of purchase of property, all capital lease obligations, the net present value of all operating lease obligations and all indebtedness secured by purchase money security interests, but excluding postponed debt
What is net present value of operating lease obligation?
Sum of discounted present values of lease obligations calculated using implied interest rate of lease. An approximation is to apply a multiple of 3.5 to annual lease obligation
What is interest expense?
For fiscal period the aggregate cost of advances of credit outstanding during that period including without limitation interest charges, capitalized interest, the interest component of capital leases, fees payable in respect to letters of credit, letters of guarantee and discounts incurred and fees payable in respect to banker acceptances
What is postponed debt?
Indebtedness that is fully postponed and subordinated, both as to principal and interest on terms satisfactory to bank to obligations owing to bank
What is tangible net worth?
Total equity - intangibles, deferred charges, leasehold improvement, deferred tax credits and unsecured advances to related parties
Intangibles are assets lacking physical substance
What is total liabilities?
All liabilities exclusive of deferred tax liabilities and postponed debt
When is newton required ?
Over 1 million TSNE
Based on revenue what are financial statement requirement ?
250 to 1 million - notice to reader cpa no assurance
1 - 10 million. Review engagement CPA prepared low assurance
10 million plus Audited cpa reasonable assurance
What are key financial performance drivers?
Sales growth
Gross margin
Operating expense ratio
A/R days, inventory days, A/P days
What are cash flow ratios?
EBITA margin & Debt service coverage
What is leverage ratio?
Liabilities/Tangible Net Worth
What is liquidity ratio?
Current Ratio
What is cash conversation cycle?
Measures time between the purchase of goods and services and final cash realization from sales and subsequent collection
Goods often include finished finished products ready for sale, goods that are in the process of being transitioned into final raw form or raw materials that have yet to be applied to the product creation process
What is account payable days ?
(Accounts Payable/Cost of Goods Sold) X 365
Accounts Payable is amount of time the business takes to pay its suppliers
The number is calculated by comparing the accounts payable from from company’s balance sheet with cost of goods from same period the result is expressed i. Term of days
What is account receivable days ?
(Accounts receivable/total sales) x 365
Accounts Receivable means the amount of time on average it takes a company to collect cash from customers after goods are sold
The number is calculated by comparing accounts receivable for given period with sales made during the same period
Result is expressed I. Terms of days
What is inventory days?
(Inventory/Cost of Goods a Sold) x 365
Means the amount of time it takes a business to sell inventory
Calculated by using the inventory. Calculated by using inventory amount from balance sheet and cost of goods sold amount for the same period
Result expressed in terms of days
What is short term financing gap?
Represents difference between length of time it takes a company to sell its inventory and collect it sales in cash and the number of days of free financing the company gets from supplier
Gap reflects the financing that lenders often fill
What is formula for short term financing days ?
Inventory days + AR days - AP days
What is short term financing requirement ?
Average sales per day x STF Days
What is average sales per day ?
Net sales / number of days
When must PSOA updated ?
BRR2 high or better - discretionary/event-based
BRR 2 mid to 3+ mid - biannual
BRR 3 + low or worse - annual
What are event based changes ?
Deterioration borrowers financial performance or bRR
Deterioration in borrowers account performance (excesses, delinquency)
Changes to collateral structure and or risk mitigation
Proposed increase credit exposure ( 3 years and longer)
term renewals with longer maturities
What is loan to value for equipment, machinery, leasehold improvement?
50-75 machinery/equipment
0 leasehold improvement, furnishings
Discretion possible proper mitigation
What is appraisal requirement ?
Non-real estate SIC
Loans supported collateral mortgage must be appraised
Exception: properties refinanced when loan amount is less than 2 million and have LTV of less than 50% of current tax assessed value if previous appraisal is less than 5/years old and the bank holds reliance letter
Or increase is less than 10 percent loan amount
When are review dates ?
BRR & CCR month end. FS submitted 30 days earlier
BRR 2 L or bette pr 180 days after YE
BRR 2L to 2H 150 days
BRR 3+H or lower 120 days
Cash management products minimum BRR?
3+M
What are quality of financial statement required?
Below 250m revenue - borrowers prepared/ tax return
Notice to reader 250 to 1 mm
Review engagement 1 mm to 10mm
Audit 10mm and over
What are exceptions of collateral ranking first?
No new funds and when taking security to strengthen position
To mortgages or deeds of hypothic on real estate
