A comprehensive and practical 2-day workshop on understanding the key financial ratios utilized in the credit risk assessment of sovereigns, banks & financial institutions, manufacturing & service companies, and insurance companies. FINANCIAL RATIO ANALYSIS A CREDIT RATINGS PERSPECTIVE About the course This practical two-day Financial Ratio Analysis Workshop is being offered with the basic objective of imparting to participants the skills, approaches and techniques used in financial ratio analysis of sovereigns, banks and other financial institutions, manufacturing and service sector companies, and insurance companies. The comprehensive 8-session programme will have a judicious mix of theory as well as practical exercises relevant in the Caribbean context. The training will also include extensive interactive discussions with the faculty experienced in credit ratings and financial ratio analysis of companies across industries / sectors. By understanding the credit ratings approach to financial ratio analysis, the participants will be able to enhance their skills and knowledge, and also benefit from discussions with the faculty on the various nuances in financial ratio analysis of sovereigns and corporates in the Caribbean. About CariCRIS CariCRIS is the Caribbean's first regional credit rating agency. It is a unique marketdriven initiative aimed at fostering and supporting the development of regional debt markets in the Caribbean. CariCRIS’ mission is to contribute to the development of a vibrant, integrated Caribbean capital market by setting the highest standards of credible independent analysis and opinion to enable informed financial decisions. CariCRIS’ technical consultant, CRISIL Limited is the world’s fourth largest rating agency and an associate company of Standard & Poor’s (S&P). Who Should Attend? The course should be of particular interest to: • Credit analysts and loan officers from commercial banks, credit unions and other lending institutions • Fixed income analysts with brokerages and investment banks • Risk analysts in banks, insurance companies and other financial institutions • Analysts in the financial sector regulatory institutions • Business graduates wishing to gain a clearer insight into practical aspects of financial ratio analysis. Expectations/ Qualifications of participants • Basic professional qualifications relevant to business analysis, accounting & finance or a basic knowledge of these areas borne out of practical experience. Profile of the Facilitators The facilitators for this training programme are senior rating professionals with over 40 man-years of combined experience in varied fields of financial analysis and economics. The facilitators have executed several credit rating assignments across various industries and have conducted many training sessions for credit officers and middle and senior management staff in commercial banks, insurance companies and credit unions. Course Coverage Over the 8 sessions, the training programme will cover the following: SESSION 1 • Ratio analysis of Sovereigns ¾ Fiscal Sector Ratios o Current expenditure, current revenue, current balance, overall fiscal balance, primary fiscal balance, gross domestic investment and gross national savings. ¾ External Sector Ratios o Current account balance, capital & financial account balance, overall external balance, debt service ratio, import cover, gross financing requirements and net foreign direct investment. ¾ Monetary Sector Ratios o Credit to the private sector, capital adequacy ratio, nonperforming loans ratio and excess liquidity ratio. SESSION 2 • Practical exercise requiring participants to calculate these ratios based on data provided for a Caribbean sovereign and group discussion of the results. SESSION 3 • Ratio analysis of Banks & Financial Institutions ¾ Profitability Ratios o Net interest spread, return on assets, return on equity, efficiency ratio ¾ Capitalisation Ratios o Capital adequacy ratio, tangible net worth/adjusted assets, tangible net worth/net non-performing loans ¾ Funding and Liquidity Ratios o Deposits/total interest bearing liabilities, total loans/total customer deposits, net funding gap ¾ Asset Quality Ratios o Gross non-performing loans/gross loans, loan loss reserves/nonperforming loans ¾ Limitations of these financial ratios. SESSION 4 • Practical exercise requiring participants to calculate these ratios based on data provided for a Caribbean bank and group discussion of the results. -2- SESSION 5 • Ratio analysis of Manufacturing Companies ¾ Profitability Ratios o Gross profit margin, operating profit margin, EBITDA margin, profit after tax margin, return on capital employed, return on assets, earnings per share ¾ Solvency Ratios o Net worth/total assets, total debt/net worth, total debt at book value/equity at market value ¾ Debt Protection Ratios o Average interest cost, net cash accruals/total debt, total debt/EBITDA, interest cover, operating cash flow/total debt, operating cash flow/debt servicing burden ¾ Liquidity Ratios o Current ratio, quick ratio, working capital, cash ratio ¾ Activity & Efficiency Ratios o Inventory days on hand, receivables days, trade creditors days, gross current assets, working capital turnover, net fixed asset turnover ¾ Limitations of these financial ratios. SESSION 6 • Practical exercise requiring participants to calculate these ratios based on data provided for a Caribbean manufacturing conglomerate and group discussion of the results. SESSION 7 • Ratio Analysis of Insurance Companies ¾ Understand the meaning and computation of capital adequacy ratio, loss ratio, expense ratio, combined ratio, profitability ratios, liquidity ratios and reserves. SESSION 8 • Practical exercise requiring participants to calculate ratios based on data provided for a Regional insurance company and group discussion of the results. -3-