Commercial Banking
Read a borrower’s financial statements
What you will learn
Distinguish reported profit from cash available for repayment.
Illustrative CFADS = operating cash before debt service − required capex
Start with operating profit, then review cash conversion, capex requirements and nonrecurring items. Map cash availability to interest and principal dates. Cross-check reported borrowing against maturities, committed lines and related-party exposures. Assess the primary repayment source before relying on security or refinancing. A fictional borrower generates ₹30 crore operating cash before debt service and requires ₹8 crore capex. Illustrative CFADS is ₹22 crore.
A fictional borrower generates ₹30 crore operating cash before debt service and requires ₹8 crore capex. Illustrative CFADS is ₹22 crore.
Start with operating profit, then review cash conversion, capex requirements and nonrecurring items. Map cash availability to interest and principal dates. Cross-check reported borrowing against maturities, committed lines and related-party exposures. Assess the primary repayment source before relying on security or refinancing. A fictional borrower generates ₹30 crore operating cash before debt service and requires ₹8 crore capex. Illustrative CFADS is ₹22 crore.
Which is the primary repayment evidence for an operating borrower?