As a general guideline in doing the above analysis you should focus on the follo

As a general guideline in doing the above analysis you should focus on the following aspects:
FIN6346: Credit Analysis Summer 2022
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• Industry and Firm Analysis: Nature of the industry which your company belongs to.
Focus on things such as the regulations, seasonality, supply and demand patterns, need
for labor and technology and any special needs that might force the company to
accumulate any specific assets/liabilities. Uniqueness of the firm’s strategy/products.
• Management and Governance: Ownership and control, board structure and firm’s
interactions with the markets (Some of the data needed for this analysis can be obtained
from the proxy reports via Edgar: Look up for form DEF 14A). Experience of the
executives, board members, audit committee of the board, auditors.
• Working Capital and Debt Management: Find the financial statements of your selected
company and analyze its financials to understand default risk and the working capital
needs of a firm.
• Creditworthiness Evaluation: Cash flows, earnings, assets and liabilities, growth pattern,
any special project that company is heavily dependent upon. Credit report from rating
agencies and major outcomes.
• Risk and Return: Try to analyze this part using some of these questions: what is the risk
profile of your company? (How much overall risk is there in this firm? Where is this risk
coming from (market, firm, industry or currency)? How is the risk profile changing?
What is the performance profile of an investment in this company? How risky is this
company’s equity? Why? What is its cost of equity? How risky is this company’s debt?
What is its cost of debt? What is this company’s current cost of capital?
• Credit Rating of the Company: Calculate a credit score for the company using a scale of 1
to 100, where 100 is the highest score. You can use popular measures such as Altman Z-
score to evaluate your own rating. In rating this firm, you will need to score the
management and the industry as well.
• Recommendations: Based on the various components of the co. analysis, submit your
recommendations about the credit decision.