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Category Archives: Financial Analysis

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What are profitability ratios?

Financial AnalysisBy Surendra NaikDecember 14, 2018Leave a comment

Profitability ratios help a business entity as well as the lenders/investors to evaluate the ability to generate income as compared to its expenses and other cost associated with generation of income during a particular period. Profitability Ratios also help the managements in making business decision in respect of expansion or diversification of the business.  As…

What is cash management?

Financial AnalysisBy Surendra NaikDecember 3, 2018Leave a comment

We find many a  time, companies struggle to meet their day to day operating expenses, not because they failed to generate adequate money out of their business but they were not able to manage their cash. Cash management speaks of a wide-ranging area of finance involving the collection, handling, and usage of cash. It also…

What are Business earnings, how they are computed?

Financial AnalysisBy Surendra NaikNovember 26, 2018Leave a comment

As we all know, earnings is basically net income after tax or bottom line which determines a business entity’s share price. The earnings of a business entity also provide financial analyst certain yard stick to evaluate the financial condition and performance of a business. The earnings also reflect whether actual performance is good to the…

What is Off-Balance Sheet Exposure ?

Financial AnalysisBy Surendra NaikNovember 16, 2018Leave a comment

Off-balance sheet exposures refer to activities that are effectively assets or liabilities of a company but do not appear on the company’s balance sheet. The off-balance sheet exposures in banking activities refers to activities that do not involve loans and deposits but generate fee income to the banks. The non-fund based facilities like Issuance of…

What is a subordinated debt?

Financial AnalysisBy Surendra NaikNovember 6, 2018Leave a comment

Subordinated debt refers to the debt owed to an unsecured creditor. In the event of the bankruptcy or liquidation of the debtor, the court will prioritize the outstanding loans which the liquidated assets shall repay. Therefore, subordinated debt can only be paid if any assets left after the claims of secured creditors have been met.…

What is revaluation of assets/revaluation reserve?

Financial AnalysisBy Surendra NaikNovember 5, 20182 Comments

A business usually owns capital assets like Plant and machinery, land and building, equipment etc. The values of these assets are periodically depreciated over their useful life span both for accounting and tax purposes. The revaluation of assets is stark opposite to planned depreciation where the recorded decline in value of these assets tied down…

What is Deferred Tax Liabilities (DTL)?

Financial AnalysisBy Surendra NaikNovember 4, 2018Leave a comment

Deferred Tax Liability (DTL) can be defined as Provision for Future Taxation or an obligation to pay taxes in the future.The DTL reported on an organization’s balance sheet represents the net difference between the taxes that are paid in the current accounting period and the tax that is assessed or is due for the current…

What is debt service coverage ratio (DSCR)?

Financial AnalysisBy Surendra NaikOctober 29, 2018Leave a comment

The debt service coverage ratio (DSCR) is a method to compares a business’s level of cash flow to its multiple debt obligations including proposed term loan installments. Lenders typically calculate DSCR by dividing the business’s annual net operating income by the business’s annual debt payments. DSCR less than 1 suggests a negative cash flow, and…

How to analyse a Cash flow statement?

Financial AnalysisBy Surendra NaikOctober 28, 2018Leave a comment

The Cash flow statement represents the increased or decreased position of cash and cash equivalents in a business. In a way, it is useful in assessing the company’s ability to meet its short-term obligations. Cash equivalent means highly liquid current assets which can be readily converted into cash without any loss in value or time.…

How to prepare a project report or recommendation for bank loan?

Financial AnalysisBy Surendra NaikNovember 12, 20172 Comments

The credit officer of a bank would consider all the information provided by you in the project report while appraising your credit proposal. The office note/recommendation is prepared on the basis of key information available in the  report, as well as information collected by the bank from their internal and external investigation sources to support…

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