CCP Intermediate- Corporate credit Analysis

UNIT DESCRIPTION

The paper is intended to equip the candidate with the knowledge, skills and attitude that will enable him or her to make effective corporate lending decisions.

 LEARNING OUTCOMES

Corporate credit analysis evaluates a company’s ability to meet its debt obligations by examining financial, operational, and strategic factors. It starts with financial statement analysis, reviewing liquidity, leverage, profitability, and cash flow to gauge financial health. Understanding industry risk is critical, as sectors face varying challenges, such as market cycles and regulation. The company’s corporate strategy and management quality are also analyzed to assess long-term stability and governance.

Key elements include debt structure and covenants, where lenders impose conditions to mitigate risk, and cash flow and liquidity, which indicate the company’s ability to service debt. Analysis of credit risk on debt instruments helps assess potential recovery in case of default, while financial risk evaluates the company’s sensitivity to market fluctuations.

Additionally, country and sovereign risks assess how political and economic factors in various regions impact corporate operations. Lastly, collateral evaluation determines the value and enforce-ability of assets pledged as security.

Overall, corporate credit analysis helps lenders make informed decisions, structure loans appropriately, and manage credit risk, ensuring that the borrower remains capable of meeting obligations, thereby reducing the likelihood of default.