Financial Statement Analysis for Credit and Lending Decisions
Detailed financial analysis skills built through structured, hands-on exercises — from reading balance sheets to interpreting cash flow statements.
Programme Structure
Program Stages
- Stage 1 — Borrower financials: Reading compiled, reviewed, and audited statements; understanding the difference in reliability
- Stage 2 — Cash flow analysis: Operating cash flow, free cash flow to firm, and cash available for debt service
- Stage 3 — Leverage and coverage metrics: Total debt/EBITDA, interest coverage, fixed charge coverage — definitions and benchmarks by industry
- Stage 4 — Working capital cycles: Impact of receivables, inventory, and payables on short-term liquidity for seasonal borrowers
- Stage 5 — Projection analysis: Evaluating management forecasts and building stress-tested scenarios
- Stage 6 — Covenant mechanics: Standard and maintenance covenants, EBITDA add-back disputes, and early warning indicators
- Stage 7 — Collateral and structure: How asset quality in the balance sheet affects security and recovery assumptions
- Stage 8 — Credit memo writing: Structure, tone, and analytical standards for formal credit submissions
About this workshop
A lender reads statements differently
Equity analysts focus on growth and returns. Credit analysts focus on repayment capacity, covenant compliance, and downside scenarios. The analytical tools overlap, but the questions being answered are different. This course is built around the credit perspective — specifically, what a lender needs to know before extending capital and what signals matter during the life of a loan.
Cash flow as the primary lens
Earnings multiples matter less to a lender than whether a borrower generates enough cash to service debt. The course builds from cash flow analysis outward — calculating debt service coverage, understanding seasonality effects on working capital, and stress-testing projections under conservative assumptions. Participants work through cases involving small business borrowers, mid-market companies, and asset-heavy industries.
Covenant design and monitoring
Financial covenants translate statement analysis into contractual thresholds. A leverage covenant set at 3.5x total debt to EBITDA requires knowing exactly how each term is defined in the credit agreement. Sessions cover standard covenant definitions, common adjustments, and how to monitor compliance using periodic filings.
Industry coverage
Cases span real estate, manufacturing, hospitality, and professional services — sectors with structurally different cash flow patterns and risk profiles.
Practical output
Participants complete a full credit memo on an assigned borrower, including financial analysis, covenant recommendations, and a credit risk summary. The format mirrors what most Canadian Schedule I banks require for commercial loan approvals.
Financial statements carry more information than most readers notice — the skill is in knowing where to look and what questions to ask.
What this workshop covers vs. what it expects you to bring
| Area | Covered in workshop | Prior knowledge needed | Practical exercise |
|---|---|---|---|
| Balance sheet reading | |||
| Income statement analysis | |||
| Cash flow interpretation | |||
| Financial ratio calculations | |||
| Accounting fundamentals | |||
| Sector-specific benchmarks |
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