2024 Financial Statement & Cash Flow Analysis Bootcamp

September 17-19, 2024
(TUE-THU)
9:00 am - 4:00 pm 

CBAO members: $1,195
Non-members: $1,795
(Day 1: $475/$715) 
(Day 2-3: $895/$1,345) 

Program Description

Want to learn how to analyze personal and business financial statements and tax returns in a compact, intense, case-based three-day session? Want to move beyond ratio analysis and into the operating, investing and financing cash flows of a business and how they affect loan repayment? Want to learn the basics of CRE cash flow and how it is different? This workshop is your answer, whether you are new to lending and financial analysis, or even if you have been away from financial analysis for a while and need a refresher. (Bring your calculator and pencil!)

Day One: Personal Financial Statements and Tax Returns plus Personal Cash Flow 

Introduction to Personal Financial Statements

  • Goal: Determining the strength of an individual’s financial condition, as a direct borrower, or as a guarantor of a business loan
  • Eight items to look for in a personal financial statement (PFS)
  • A “three-step” approach to reviewing and analyzing a PFS in a time-efficient manner

How Personal Financial Statements are Constructed

  • Compare and contrast the main formats of a PFS, including accountant-prepared
  • Identifying the key components:  assets and liabilities, reported income and contingent liabilities

Basic Ratios Used in PFS Analysis and Case Example

Introduction to Personal Tax Returns

  • Key components and schedule within a personal Form 1040, including format changes from 2017 to 2018, and then again from 2018 to 2019
  • Why is cash flow often different from taxable income (expense)?  Identify the spectrum of situations and where cash flow is more important than income (expense)

Personal Cash Flow Cases

  • Simple case example using a PFS and one small business
  • More businesses, pass-through Schedule K-1s and a second case example
  • Overview of global cash flow issues and obstacles (transition to Day 2)

Day Two: Business Financial Statements and Tax Returns 

Introduction to Business Financial Statements

  • Financial statement analysis options and tools, plus the basic structure and purposes of business financial statements
  • Compare and contrast the three methods of accounting

How Business Financial Statements and Tax Returns are Constructed (Accounting Refresher)

  • Compare and contrast the cash method and accrual method of accounting
  • Construct the following for an example business (case)
    • Conventional balance sheet, income statement and statement of cash flows on both the cash and accrual basis
    • Tax return balance sheet (Schedule L), income statement, Schedule M-1 and Schedule M-2 on the cash basis
  • Describe the key differences in all three presentations of the financial performance of the example business (cash vs. accrual vs. cash/income tax basis)
  • Identify the role and function of the Schedule K-1, plus differentiate between income/expense and actual cash flow from the business to its owners

More on Accrual Accounting Typically Used by Larger Businesses

  • Key standards, limitations and alternatives within accrual accounting or generally accepted accounting principles (GAAP)
  • Why other comprehensive bases of accounting (cash and income tax) are appropriate for many smaller businesses
  • Identify various levels of accountant-prepared financial statements, including compilations, reviews and audits

Ratio Analysis

  • Basic guidelines for classifying and spreading the data
  • Identify the key components of a balance sheet
  • Calculate liquidity and leverage ratios for an example business and interpret the results
  • Identify situations with positive or negative working capital
  • Describe common-sizing of the balance sheet
  • Identify the key components of an income statement
  • Calculate profitability and simple cash flow measures for an example business and interpret the results
  • Calculate efficiency and debt coverage ratios for an example business and interpret the results
  • Explain the use of industry and comparative data within financial analysis

Day Three: Business Cash Flow Analysis 

C&I: Why You Need More Than Traditional Ratios and “Cash Flow” as Net Income + Depreciation + Interest Expense

  • Evolution of Statement of Financial Accounting Standards (SFAS) 95 and the resulting SCF, plus development of the UCA model
  • Example: the true cash flow impact of changes in efficiency ratios such days-on-hand of accounts receivable
  • Sources and uses of cash for both SCF and UCA, plus the three main categories of cash flow, and the indirect and direct methods for compiling a SCF

Building an Accountant-Based Statement of Cash Flows (SCF)

  • Construct a SCF on the indirect method from the Day 2 case study
  • Construct the operating section of a SCF on the direct method as a bridge to the UCA model

Comparing and Contrasting the Banker-Based UCA Cash Flow Model to the SCF

  • Compare the formats of SCF and UCA, plus review the UCA model from the Day 2 case study
  • Compare key subtotals between a SCF and UCA (from case study)
  • Identify the three basic cash flow questions for which the UCA model provides answers
  • Identify the cash flow coverage ratio components imbedded within the UCA format
  • Explain why you may need to re-position distributions/dividends within the UCA format in order to improve cash flow conclusions for privately-held, pass-through businesses and a typical global analysis
  • Compare SCF and UCA analytical conclusions with earlier conclusions from traditional ratio analysis
  • Explain how commercial real estate (CRE) cash flow is different, due to typical usage of single-asset entities with limited balance sheet cash flow implications (except for capitalized expenditures and owner distributions)

CRE: The Components of and Building a CRE Cash Flow

  • Identify the key components of CRE cash flow, such as gross potential income, vacancy and reserves
  • Construct a CRE cash flow from a case, working from a typical tax return Form 8825, including using a cap rate to estimate the property’s value
  • Explain the concept of stress-testing at the transaction level
  • Identify the factors that drive cap rate levels

Who Should Attend:

Credit analysts, portfolio managers, assistant relationship managers, community bankers, small business lenders, commercial lenders, consumer lenders, branch managers that lend to business owners, private bankers, special assets officers, loan review specialists and others involved in business and commercial lending. 

Meet the Facilitator

Richard Hamm

Richard has been training bankers for 30 years, designing and delivering courses specializing in commercial lending and credit, including portfolio and risk management, commercial real estate (CRE) and appraisals, plus selling and negotiating skills, and director training. During his banking career, he was active within RMA’s chapter structure and served on several committees at the national level.

Richard is a facilitator for the Barret School of Banking and the Graduate School of Banking at Wisconsin. He has published 20 articles in the RMA Journal.

If you are having issues with registering online, please contact Malia Widder, (614) 610-1877.
When
9/17/2024 9:00 AM - 9/19/2024 4:00 PM
Eastern Daylight Time
Where
CBAO Ray Campbell Learning Center 8800 Lyra Drive Suite 570 Columbus 43240
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