Credit risk management

Developed from courses taught at the American Management Association, one of the nation's leading educational organizations, by a 28year veteran of credit risk assessment, Credit Risk Management is a detailed examination of the entire process of determining the creditworthiness of a prospective borrower and outlines exactly how credit assessments are made. Equal parts realistic analysis and cautionary advice, part one is arranged in an "A, B, C, D" format ("A is for Analysis;' "B is for Building Essential Business Credit Information," "C is for Considering All Factors;' and "D is for Decision"); while part two is composed of twelve chapter-length real-world case studies, each illustrating (with solutions) commonly encountered problems. The book offers detailed, step-by-step guidance, using a variety of analytical approaches, for helping you assess an applicant's financial status and degree of credit risk:

• Techniques for obtaining financial data, while controlling the cost of acquiring it
  
• Common-size analysis-for comparing firms of different sizes to see how successful they are
  
• Trend analysis-for comparing financial statements from the present year to previous years
  
• How to calculate ratios for inventory turnover, accounts payable turnover, gross profit margin, return on investment
  
• Key sources of current business and credit information-including Dun & Bradstreet, Experian, Graydon America, the Internet
  
• Determining the cost-effectiveness of information

Also provided is a checklist of financial, credit, and business factors to consider when forming a "sound business credit decision" (including size of the sale, profit margin on sale, your company's level of control over the customer, and other possible costs and value to the company if credit is extended). The book arms you with anticipated best/worst case scenarios (including successfully dealing with customer counteroffers), ways of isolating information gaps, and a guideline for consolidating facts to vindicate your decision. And once you've arrived at a credit decision that is high in value and cost-effective, the book shows you how to eliminate any loopholes in your recommendation to management that might lead to rejection.

The only resource a credit professional needs to perform a detailed analysis of a credit applicant, Credit Risk Management offers detailed, practical, real-world guidance on making a decision that will benefit your company's bottom line-and financial future.