The paper 'Credit Worthiness for Black Gold Limited" is a perfect example of a finance and accounting case study. The credit assessment of black gold limited has been concluded and the report provides a detailed summary of the company’ s business situation as well as the extent to which the company can be awarded the loan. This report is realized after considering many factors that will lead to credit risk to the bank and thus the assessment provides reliable information that can be relied upon in concluding on the creditworthiness of black gold limited.
The bank is committed to maintaining the client and moreover it is keen on ensuring that the bank does not incur huge credit risk consequential from the business situation. The creditworthiness of black gold limited provides an agreeable result and thus the business qualifies for a loan subject to limitation. it can be observed form the analysis that the business is recovering from financial depression and the loan market base such as at 85% lending rate in order to cater for 15% business risk since the trend of the business is not constant and thus hard to forecast the precise future trend of the company situation and concluding on the amount of loan to be processed. Many factors were considered in understanding the business situation and risk as well as the historic trend of business performance.
As depicted in the appendices below. The ration analysis such as the return on equity provides an increasing trending as compared to the financial year 2013. This implies therefore that the business can return investment in working capital by 30%. The capital and liquidity ratio of the company provides a declining capital asset ratio implying that the business is to minimize the use of loan capital and thus the liquidity risk for the business is declining.
The profitability ratio provides a declining then an increasing trend to the year 2014 though very low as compared to the year 2012. The analysis of the black gold financial statement provides information and understanding of the business situation and factors that hinder full loan processing. the business cannot qualify for a full loan of $5 billion since the business trend provides a decline and increasing trend but quite below as compared to the performance of 2012.this pose a risk threat since the business trend is not consistent and consequently it will pose challenge and threats of risk such as loan default or restructuring of the loan. Risk and return that the financial provides to the bank In understanding the creditworthiness of a customer, the bank considers some factors.
The following are some of the factors that were considered in settling on the extent of loan to be processed for the company.
The financial history as well as the credit history of the company which as observed provide a decline and increasing trend but a slower pace. An analysis is made on the capacity. This was made on the capability of the company to earn more income so as to pay back the loan. The financial statement of the business provides a recovering increase in net profit from the previous years. This will challenge the processor loan processing since it can be observed that the business is recovering from a profit downfall and thus it is hard to forecast the business situation of the company this is hard to provide a 100% full loan since the business performance as depicted by the capacity provides a risky situation to the bank.