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Corporate Lending Research Paper

Corporate lending is a risky venture for any financial institution. Research shows that corporate lending is done with a decision process that is studied in many MBA programs at the college level. Many professors assign topics just like this and our writers custom write each project to conform to the exact criteria you need.

Factors to consider when examing corporate lending

  1. How much, if any, would you lend the firm (the credit decision)?
  2. How much, if any, would you invest in the firm or corporation (the investment decision)?
  3. Alternatively, you could ask: What would you recommend for this corporation as an investment (buy, hold, sell) and how the investment would fit into a client portfolio (a major portion, small amount, speculative, etc.)
  4. How much would you be willing to pay for the firm in a merger/acquisition (the valuation issue)?

In order to come up with the answers to these questions please use quantitative information largely in the form of ratio analysis and financial statement analysis. At a minimum include the following ratio's in the report:

  • Debt ratio
  • Current ratio
  • Return on Sales
  • Asset Turnover
  • Return on Equity
  • Price-earnings Ratio
  • Average collection period
  • Times interest earned
  • Fixed asset ratio

Key Terms and Concepts to Include in the Corporate Lending:

  • GAAP
  • IASB
  • AFRS
  • Comparability
  • Consistency
  • Disclosure (footnotes)
  • Entity concept
  • Historical cost convention
  • Relevance
  • Reliability
  • Revenue recognition
  • Time period concept
  • Leverage
  • Liquidity
  • Accrual accounting
  • Earnings per share
  • Income from continuing operations
  • Cost of goods sold
  • Extraordinary items
  • Direct method
  • Indirect method
  • Write-offs
  • Cash budget
  • Cost drivers
  • FIFO
  • LIFO
  • Activity based cost
  • Full cost method
  • Fair value method

Annual Report Project Guidelines:

The Annual Report Project is an analysis of the annual report of a company selected by your team. It is a research project and is not limited to the financial statements of the company. The financial statements are only a subset of information that affects user decisions. Accordingly, the analysis should include additional information about the influences of general economic variables (interest rates, exchange rates, business cycle, governmental fiscal policies, inflation, etc.) and industry/competition/technology on the firm.

The Written Report:

Please use the following format for the written component of the project:

  1. Executive summary answering the above 3 questions, with a summary of how you arrived at your conclusions;
  2. Details of supporting calculations, economic and industry influences, methodology (suggested format; methods used for lending, investing and valuation questions, alternative methods, why your methods were selected, and any limitations or critical assumptions to consider that would affect your results);
  3. Important accounting method issues and the effects of alternative accounting methods (one example is sufficient, it may be necessary to make assumptions about data or provide examples);

TEAM ANNUAL REPORT PROJECT


The Annual Report Projects primary purposes are to:

  1. Become familiar with the terminology and develop the analytical skills for financial statement analysis;
  2. Extend the concepts from class and apply them to an example of how financial statement analysis can be used (lending, investing and valuation decisions);
  3. Enhance research, presentation and communication skills;
  4. Address the issue(s) of the "quality of financial reporting" and "managed" earnings
    ("income smoothing").

The analysis of the firm should specifically answer the following questions:

  1. How much, if any, would you lend the firm (the credit decision)?
  2. How much, if any, would you invest in the firm (the investment decision)?
    alternatively, you could ask: What would you recommend for this firm as an investment (buy, hold, sell) and how the investment would fit into a client portfolio (a major portion, small amount, speculative, etc.);
  3. How much would you be willing to pay for the firm in a merger/acquisition (the valuation issue)?
  4. The report should include appropriate explanation and support for how the answers to the above questions were derived.

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