Credit Risk Modeling - Build Credit Risk Model from Scratch
Master financial statement analysis and credit risk models to unlock the key to evaluating corporate financial health!
Credit Risk Modeling - Build Credit Risk Model from Scratch free download
Master financial statement analysis and credit risk models to unlock the key to evaluating corporate financial health!
Introduction:
This comprehensive course is designed to take students through the intricate process of financial statement analysis and credit risk modeling, using real-world companies as case studies. Students will learn how to derive and analyze financial statements, apply models like Altman Z and Merton’s Model, conduct working capital analysis, and evaluate credit risk through advanced modeling techniques. By the end of the course, students will have the tools and knowledge to effectively assess a company’s financial health and risk profile.
Section 1: Introduction
In this section, students will be introduced to the course objectives and structure. The focus will be on laying the groundwork for understanding financial statements and credit risk analysis, with an emphasis on the practical applications of these concepts in real-world scenarios.
Section 2: Financial Statement Derivation of Company A
This section delves into the financials of Company A, guiding students through the derivation and analysis of its financial statements. From dissecting income statements to understanding balance sheets and cash flow statements, students will get hands-on experience with each component of financial reporting. The key focus is on reading and interpreting financial data to assess the company’s performance.
Section 3: Financial Statement Derivation of Company B
Similar to Company A, this section focuses on Company B’s financial statements. Students will explore how to analyze the balance sheet, cash flow, and other key financial reports, identifying trends and comparing company performance. This section highlights the differences between companies in terms of financial health and strategy.
Section 4: Altman Z-Score Model
In this section, students will be introduced to the Altman Z-Score Model, a widely used tool for predicting bankruptcy and financial distress. Through detailed examples, students will learn how to apply this model to Company A and Company B, understanding the factors that influence a company's risk of insolvency.
Section 5: Structured or Merton’s Model
The Merton’s Model is a key focus in this section, where students will explore its application to credit risk analysis. Students will learn how this model is applied to both Company A and Company B, gaining insights into how stock prices and balance sheet data contribute to credit risk evaluations. Additionally, cumulative credit analysis will be covered to further enhance their understanding.
Section 6: UFCE Modeling
Unlevered Free Cash Flow to Equity (UFCE) modeling will be explored in this section. Students will walk through the steps involved in calculating UFCE for both companies, building a deep understanding of how free cash flow is used in valuation and credit risk analysis. This hands-on section provides practical experience in financial modeling.
Section 7: Working Capital Analysis
Students will dive into the working capital structures of Company A and Company B in this section. By analyzing working capital needs and trends, they will gain the skills to assess liquidity and operational efficiency, which are critical for financial health assessments.
Section 8: Financial Statement Analysis
This section takes students through a detailed financial statement analysis for both Company A and Company B. By comparing the two companies, students will learn how to identify financial strengths and weaknesses, interpret key financial ratios, and derive meaningful conclusions about the companies’ financial health.
Section 9: Evaluation Metric
Students will be introduced to various evaluation metrics used in credit risk analysis. This section will cover the calculation and interpretation of these metrics, providing the tools to compare and contrast the financial health of different companies, including the impact of various market factors on the analysis.
Section 10: Way Out Analysis
Way Out Analysis focuses on understanding the potential exit strategies for a company facing financial distress. Students will also explore internal rating analysis, learning how companies are evaluated for creditworthiness and the steps they can take to improve their financial standing.
Section 11: Final Recommendation
In the concluding section, students will synthesize all their learnings to provide a final recommendation regarding the financial health and credit risk of Company A and Company B. By combining financial statement analysis, credit risk models, and evaluation metrics, students will deliver well-rounded recommendations supported by data-driven insights.
Conclusion:
By the end of this course, students will be well-versed in analyzing financial statements, applying credit risk models, and making informed financial decisions. They will be equipped with both theoretical knowledge and practical skills to analyze a company’s financial stability and risk, positioning them for success in the fields of finance, accounting, and investment analysis.
