Learning Objectives:

  • Analyse business financial statements for credit assessment.

  • Perform trend analysis, common-size analysis, and ratio analysis.

  • Understand auditor’s reports and different financial statement types.

3.1 The Importance of Financial Statement Analysis

Financial statement analysis is central to commercial lending. Springfield College’s BUSM 363 course identifies “financial statement analysis” as a core topic . The FIN 438 course at Campbell University places “emphasis on the analysis of corporate financial statements to determine the creditworthiness of commercial loan requests” .

3.2 Analytical Techniques

The IBA programme covers:

  • Trend Analysis: Comparing financial data across periods

  • Common-Size Analysis: Expressing each line item as a percentage of a base figure

  • Ratio Analysis: Calculating and interpreting key financial ratios

  • Industry Analysis: Comparing the borrower’s performance to industry benchmarks 

3.3 Financial Statement Types and Quality

The IBA programme covers “Types and Quality of Financial Statements” and “Financial Accounting 101 for Lenders” . The Connecticut Bankers Association programme identifies “Financial statement alternatives (Compiled, Reviewed, Audited)” . Understanding the level of assurance provided by different financial statement types is essential for credit assessment.

The SMU Academy programme covers “Auditor’s Report,” “Financial Performance Analysis,” “Financial Health Analysis,” and “Cashflow Statement Analysis” .

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