Banking. Borrower rating (most important)

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Banking. Borrower rating (most important)

Lecture notes, cheat sheets

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Topic 21. Borrower rating

It is based on a point system for assessing creditworthiness. Creditworthiness ratios, depending on the actual value compared to the standard, are determined by class: 1 class (100-150 points) - first-class, 2 (150-200) - acceptable, 3 (more than 200) - below the standard.

They count according to 4 standards: K. (coefficient) of absolute liquidity, K. of intermediate coverage, general K. of coverage, K. of security.

1) K. (coefficient) of absolute liquidity = the most liquid assets / the amount of short-term liabilities of the borrower. The most liquid assets: cash, short-term financial investments in securities, receivables up to 30 days. Shows how the borrower is currently able to repay short-term obligations at the expense of the most liquid assets available. Norm - 0,1-0,3

2) intermediate coverage ratio = current assets, / current liabilities. Current assets: accounts receivable up to a year, finished products in stock, the most liquid assets. Shows what part of short-term liabilities can be repaid after the sale of short-term liquid assets. The norm is not less than 1.

3) total coverage ratio = working capital / current liabilities. Working capital = current assets + inventories + work in progress. Shows how much the borrower can repay short-term obligations by realizing all working capital. Norm - not less than 2.

5) security ratio = equity / balance sheet. Shows how the activity is financed by equity. Normal - the higher the better. Trade - 0,3, construction - 0,4, industry - 0,6

Authors: Shevchuk D.A., Shevchuk V.A.

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