Analyzing a commercial business can be tricky. Commercial businesses can be very different from each other even if they sell the same product. In addition, if you are unfamiliar with the particular industry, how do you measure management’s performance? The latest release of FINPACK has an overhauled C & I Analysis that helps you better analyze your commercial credits, as well as management’s ability.
Customer Information Needed
The FINPACK C & I Analysis uses the income statement or tax forms received from a customer to analyze the business. Once the information is entered, simply select the bookend balance sheets for the income statement or tax form to be analyzed.
C & I Business Analysis Report
Let’s talk about the output. The analysis output starts with an Executive Summary trend report. This provides an overview of the report. On the lower half of this page, you will find industry ratios, as well as the cash cycle analysis. The cash cycle analysis evaluates how quickly cash moves through the business. Within the income statement (for both common sized and percent change), the expense detail is provided. This will help you work with your customer to identify particular expenses that may be fluctuating or need to be reined in.
At FINPACK, we have had several lender requests to include ratio calculation details in output, just as we do with other FINPACK output. Therefore, we have added a detailed ratio report that walks you through the ratio calculations, including the cash cycle days, for example.
Cash Drivers Report
The biggest – enhancement to the FINPACK C & I Analysis is the addition of a Cash Drivers report. This report is using the main cash drivers of a commercial business – sales, operating expenses, cost of goods sold, accounts receivable, accounts payable and inventory. This report shows the trend of the cash drivers and their impact on cash from either growth or management. This report aims to measure the unmeasurable: management’s ability to manage the business!
Let’s take a look at a scenario to explain. We all know as a business grows it requires more cash. So, to feed more sales, the business will need to buy or make more finished inventory to sell. In that process, management might be able to capture some discounts in purchasing inventory and because of that, more cash is kept in the business. This report measures both how cash drivers respond to changes in sales and management’s response to this operating environment.
The help guide in FINPACK has much more detailed information about how these numbers are calculated, but we encourage you to take a look at the new output and be on the lookout for a more detailed FINPACK News post about this exciting report!