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银行信用风险评估论文,Abstract
In this paper the effects of Basel Ⅰ and Basel Ⅱ on small and medium-sized enterprises is examined. Since the introduction of Base I, banks need to cover credit risks with 8% equity. With the introduction of Base II, this has been diversified and the amount of equity to be held is determined by the rating of the company. The most important factor for the rating is the probability of default for the respective company.
With the help of a rating tool called Company-Check the financial statements for two years are rated for two different companies, which both are categorized as being an SME. Especially for small and medium-sized companies it is essential that they know what to do to upgrade their rating, as these companies have a relatively low equity ratio (indicating that they are dependent on external financing). The rating done by the tool show that even for medium-sized companies it makes sense to pay attention on the structure of their financial statements and the according ratios.
Key words: Basel Ⅰ, Basel Ⅱ, small and medium-sized enterprises, Rating, Company Check
摘要
本论文主要研究1988年《巴塞尔协议》和2006年的巴塞尔新资本协议（Basel II）对我国中小企业的影响。1988年的《巴塞尔协议》中规定商业银行必须达到最低资本充足率8％，使银行对风险更敏感，使其运作更有效。而巴塞尔新资本协议则在此基础上进行修改。新资本协议的内容更广、更复杂。这是因为新协议力求把资本充足率与银行面临的主要风险紧密地结合在一起使其更加多元化，即银行资本适足率取决于公司的信用风险评估，规定值的重要因素则是各个公司的违约概率。
，称财务报表两年分为两个不同的公司,均归为作为一个中小企业。
Table of Contents
Introduction
Current situation
Problem
Objective
Methodology and Structure of the Paper
Basic Overview
2.1 A Define Of Small and Medium-Sized Enterprises
2.2 Overview and Shortcoming of Basel Ⅰ
2.3 Overview of Basel Ⅱ
Rating
3.1 External Rating-The Standardized Approach (SA)
3.1.1 Advantages of the External Rating
3.1.2 Disadvantages of the External Rating
3.1.3 Cost of External Ratings
3.1.4 SME Rating Agencies
3.2 Internal Ratings
3.2.1 Internal Rating and SME
Change in Financial Ratios and Their Implication for Ratings
4.1 The simulation tool: Company Check
4.2 Summary and Findings
Conclusion
⒈Introduction
This paper examines the effects of Basel Ⅰ and Basel Ⅱ on small and medium-sized enterprises, with a special focus on the rating of financial statements. In the following chapters a basic overview is giving, which contains a definition of SMEs, an introduction to Basel Ⅰ and Basel Ⅱ and the explanation of the different rating modes in use. After that with the help of a rating simulation tool two balance sheets from different companies are rated. This rating will then be analyzed and discussed.#p#分页标题#e#
1.1Current situation
Due to the implementation of Basel Ⅰ the minimum capital requirement for banks for giving out loans has been set to a flat rate of 8%.This has been changed in Basel Ⅱ, which went into effect beginning of 2008.Now it depends on the company’s risk factors how much capital is to be held by banks. This risk is measured via a rating that is done for companies applying for a loan either by an external rating company or, if the bank qualifies for that, by an internal rating. The loan conditions and therefore the price for debt for the company vary according to the rating they get.
1.2 Problem
As mentioned above, one of the factors influencing the rating of a company and thereby loan conditions is the analysis of financial statements, which also includes financial ratio analysis. Most SMEs are primarily financed by debt, which means they have a low equity ratio, which is one of the most important ratios analyzed.
1.3 Objective
The objective of this paper is to find out how the rating is determined with the input of financial statements only and how the result can change over a period of two years of business.
1.4 Methodology and Structure of the Paper
In order to reach the above-mentioned objective two different methodical approaches are used. In the beginning secondary research in the form of desk research is done. This type of research is useful to get a basic understanding of Basel Ⅰ and Basel Ⅱ, as well as the most important part of Basel which is the rating. Afterwards an empirical analysis is done using “Company Check”, a simulation tool, to rate two anonymous financial statements of different. For both financial statements two years are given to be able to compare and discuss the development.
⒉ Basic Overview
In this section the grounding for the work is laid down. It starts with a brief definition of an SME for the purposes of this paper and states problems an SME might face. After that follows an introduction to Basel Ⅰ pursued by the shortcomings of this capital accord. Subsequently Basel Ⅱ is introduced with the three pillar system and a short overview about the rating system, which is explained in more detail in the next chapter.
2.1 A definition of Small and Medium-sized Enterprises
As the aim of this paper is to investigate the effects of Basel Ⅰ and Basel Ⅱ on small and medium-sized enterprises, a definition of those companies is necessary. In 2003, the Office for National Statistics issued a commission recommendation concerning the definition of small and medium-sized companies. The criteria for this classification are the total headcount of the enterprise and the yearly turnover or balance sheet total.
[Office for National Statistics-Small and medium-sized enterprise standard provisional regulations 2003]
Enterprise category Headcount Turnover or Balance sheet total
Industry <2000 <30million <40million
construction industry <3000 <30million <40million#p#分页标题#e#
retail trade <500 <15million
wholesale l business <200 <3million
Transportation <3000 <30million
Postal Services <1000 <30million
Hotels and Catering Services <800 <15million
Table 1: Definition of Small and medium-sized enterprise
The importance of SMEs for the Chinese economy is shown by the table below. The numbers of small and medium-sized enterprises in China are approximated 60.74% of the total number of enterprises in 2003, which had already increased to 99% in 2009.
Enterprises by size group 2003
profession Total(a hundred million) Small and medium-sized enterprise assets accounted for the industry %
small and medium-sized enterprises
Total 168808 102530 60.74
Agricultural non-staple food product processing industry 4142 3493 84.34
food manufacturing 2307 1863 80.76
textile industry 2377 2034 85.56
tanning industry 1334 1192 89.31
Furniture Manufacturing 616 570 92.48
plastic product industry 2960 2703 91.32
Non-metallic mineral products industry 7583 6413 84.57
metal product industry 3257 2997 92.03
office supplies and
machine building industry 1524 1298 85.14
Arts and Grafts Products and Other Manufacturing 885 839 94.89
Table 2: Enterprises by size group 2003
http://tjsj.baidu.com/pages/jxyd/30/73/45b785115814273bfcf7a61259ba5c16_0.html
Proper financing for SMEs is crucial, as not only individual entrepreneurs are affected, but also their employees and in a broader sense the whole Chinese economy.
2.2 Overview and shortcomings of Basel Ⅰ
In the early 1980’s the Basel Committee on Banking Supervision has been founded by the Central governors of the G-10 Countries. They were assigned to take care about the capital resources of credit institutions, which became necessary because of failures of several US and Japanese banks. The objectives if the Committee were to harmonize international supervisory standards and increase the stability of the financial market. In 1988 the Basel Ⅰ Capital Accord (also referred to as BaselⅠ) was published and immediately implemented by the member states of the committee. [FMA2008a]
BaselⅠsuggests a minimum capital requirement of 8% of a banks risk-weighted assets for all credits given, which is also known as Cooke ratio and first had to be met in 1992. The Basel Capital Accord introduced four major risk categories with weights of 0%, 20%, 50% and 200%. These weights are calculated based on the 8%.[FMA2008a]The categories and respective minimum capital requirements are shown in the table below.
Weight Minimum capital requirement Loan category
0% 0% Loans to governments of OECD countries
20% 1.6% Loans to institutions
50% 4% Loans fully secured by mortgages on residential property
100% 8% All other risk assets, mainly corporate loans
Table 3:Risk categories as defined by BaselⅠ
The major problem of this capital accord was that equity differentiation according to the individual risk of the borrower was improper, as the weights were only defined by the loan category the borrower was in. [FMA 2008b] That meant that for a loan to a small bank less equity was required than for a loan to a well-running multinational enterprise. Additionally the bank did not receive any benefits if it diversified the credit risk, meaning under BaselⅠit made no difference if a certain amount was given to only one company instead of many. But this in fact does make a difference for the risk of a bank. The third problem was that neither tenor nor the structural arbitrage was taking into account for the calculation of the equity that had to be held by the bank, factors that are really important for a bank.#p#分页标题#e#
[Crouhy,Michel,Dan,GalaiandRobbertMark.,2001,”RiskManagement”,USA:McGraw-Hill Companies]
The above-mentioned problems and weaknesses of the new capital accord gave the reasoning for the Banking Committee on Banking Supervision to renew the policies introduced in BaselⅠ. Therefore they started to work on a new Capital Accord in 1999, which is commonly known as Basel Ⅱ.
2.3 Overview and shortcomings of Basel Ⅱ
The work on the second Capital Accord was aimed to remove the shortcomings identified in Basel. There were three consolidation papers in 1999,2001 and 2003 in which discussions and comments of all interests banks were included.[Hartmann-Wendels,Tomas.,2003, “BaselⅡ”,Heidelberg: Economica Verlag] In 2004 the final new Capital Accord (Basel Ⅱ) was published, there is a transition period lasting until end of 2009 by which banks fully have to adhere to all requirement set by Basel Ⅱ.[Cluse,Michael and Tobias Stellmacher., 2005, “Basel Ⅱ”,Deloitte,pp167-208]
The objectives of Basel Ⅱ are similar to those of Basel, which are the harmonization of international supervisory standards and increased stability of the financial market, but also contain increased risk sensitivity and minimum standards for risky deals.[Bruckner,Bernulf and Hans Hammerschmied.,2003,” Basel Ⅱ”,Vienna:Manz Verlag] to fulfill these objectives, the new Basel Capital Accord introduces a system of three pillars. The first pillar controls the minimum capital requirements and includes the rating concept. Parts of the first pillar are taken from Basel Ⅰ. The second and the third pillar are entirely new. The second one sets regulatory frameworks for banks and supervises them. The third introduces disclosure requirements for banks and thus takes care of the transparency.[FMA,2008c]
The first pillar regulates the minimum capital requirements. It consists of three major risk categories, the market risk, credit risk and operational risk. The market risk consists of interest rate risk, exchange rate risk and security price risk. Credit risk means that a change in the counterparty’s credit quality will have a negative effect on the value of a bank’s position. Credit risk also includes default risk which is the risk that the counterparty is unable or unwilling to pay; that is the worst case. . [Crouhy,Michel,Dan,GalaiandRobbertMark.,2001,”RiskManagement”,USA:McGraw-Hill Companies]Operational risk is defined by the Bank of International Settlements as “risk of loss resulting from inadequate or failed internal process, people and systems or from external events” including legal risk, but excluding strategic as well as reputational risk.[BCBS,2006,”International Convergence of Capital Measurements and Capital Standards-A Revised Framework.”Basel Committee Publication no 128. Basel:BIS] One of the main achievements of Basel, which is incorporated in the first pillar, is the rating. The rating summarizes all risks a company faces and according to that rates the company, which is similar to grading it. There are two different ways for a rating to be done which is the external or the internal approach. Both of these types use quantitative facts (“hard facts”) and qualitative facts(“soft facts”).[Bruckner,Berbulf,Herbert Masopust and Anton Schmoll.,2003. ,” Basel Ⅱ”] #p#分页标题#e#
银行风险评估硕士论文The second pillar contains two major tasks dealing with the implementation and supervisory of the risk management system in place and the internal adequacy assessment process. The credit institutions are free to choose their own process, but certain criteria have to be met. Here comes the second task in, which is to evaluate the process implemented and take corrective actions. It has also to be taken into consideration that not all risks are reflected in the methods used in pillar Ⅰ, like external risk factors. The two tasks are also reflected in the four major principles of pillar Ⅱ. The first one is the internal capital adequacy assessment process(ICAAP) setting that banks should have a process for assessing overall capital adequacy in relation to their risk profile as well as a strategy for maintaining this capital level. The second one is supervisory review and evaluation process(SREP) stating that supervisors should assess the internal capital adequacy assessment and strategies set in principle 1 as well as their compliance with regulatory capital ratios. Supervisory action can be taken if the results of the process are not satisfying. The third principle is supervisory measures, meaning banks can be required to hold capital in access of the calculated minimum requirement. The last principle is supervisory intervention. If any problem occur, supervisors should intervene at an early stage capital to fall below the minimum requirement level.[FMA 2008d]
The third pillar deals with disclosure requirements, which are greater than ever before. Goal of those requirements is an easy comparison of the banks on the basis of their individual risk position. National supervisory authorities can implement additional information requirements if the deem it necessary. Data which would harm the competitive position of the bank does not have to be published; however general information about the process has to be published. Each bank should have internal guidelines setting which kind of data should be published and how its correctness is secured.[Cluse, Michel and Alexander Dernbach .,2005. ,” Basel Ⅱ”,pp19-44]
3、Rating
Rating is a new component of Basel Ⅱ which has the most important role in determining and interpreting the credit risk of a company. The rating is a prediction if a company is able to pay back its current and future payment obligations in time.[Bornett, Walter, Bernulf Bruchner, Hans Hammerschmied and Herbert Masopust.2006. Rating- Characteristic .p12]
The rating is like a grade, which is very important for companies applying for a loan. The reason being is that the rating determines the cost of the loan in form of a risk surcharge, i.e. a company with a good rating means gets less risk surcharge than a company with a bad rating.[Bruckner Bernulf and Hans Hammerschmied. 2008.Rating and credit decision]
There are two basic types that can be used in compliance with the regulations of Basel Ⅱ, which are the external and the internal rating.[Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ] The rating process is comprised of two elements, quantitative criteria, also known as “hard facts” and qualitative criteria, which are called “soft facts”. The hard facts contain the financial statements analysis and the analysis of book-keeping whereas the soft facts include the evaluation of the management or entrepreneur, industry analysis, future enterprise development and some more. A summary of hard and soft facts are shown in the table below. The weight of these two elements depends on the respective bank. [Bruckner,Berbulf,Herbert Masopust and Anton Schmoll.2003. Basel Ⅱ. P37-39] #p#分页标题#e#
The elements of rating
Hard facts
Financial Statement Analysis
Ratio Analysis
Analysis of book-keeping
Budgeting Soft facts
Entrepreneur/Management
Economic business analysis
Industry
Business connection
Future enterprise development
Table 4: The two elements of rating: Hard and soft facts
The weight of hard and soft facts and the elements of those depends not only on the bank internal system and is different for various industries, but is also dependent on the size of the company. Usually the smaller a company is, the less important the hard facts are. [Bruckner Bernulf and Hans Hammerschmied. 2008.Rating and credit decision]
Financial Statement analysis (Ratio analysis)
There are two different kinds of input for the financial statement analysis, which are analysis according to the same goals. The first one is a balance sheet and a profit and loss statement, whereas the other one is a simple statement of revenues and expenditures. Banks the analysis the financial structure, profitability, liquidity and efficiency. [Bruckner,Berbulf,Herbert Masopust and Anton Schmoll.2003. Basel Ⅱ.P40] Usually there are different methods for different industries and company sizes.[Bruckner, Bernulf.2004a.Manual to Basel II and rating.p44] To calculate the above-mentioned ratios, normally all the relevant data is input for an EDV program, which determines the results and does the industry analysis. The bank has to interpret this data and develop future perspectives.[Hueckmann,Carolin.2003.Creditrating of Small and Medium-sized Enterprises.p60] To make the results more accurate in most cases financial statements of two or more successive years are analyzed. [Bruckner,Berbulf,Herbert Masopust and Anton Schmoll.2003. Basel Ⅱ.P40] Some banks do not only just take the data of the balance sheet, but calculate a corrected equity. This takes into account additional data, which is important for the bank, like leasing contracts or other declarations of commitment. [Bruckner, Bernulf.2004a.Manual to Basel II and rating.p11]
3.1 External Rating-the Standardized Approach (SA)
External rating are those performed by an independent rating company. The three biggest rating agencies worldwide are Moody’s, Standard and Poor’s and Fitch. These companies use a bottom-up approach to get to the rating. The rating agency starts with analyzing the country specific risk, which includes for example legal regulations, afterwards the industry specific risk is examined. This is then followed by the risk for the business, including the management evaluation and position of the enterprise within the industry; according to that data a rating is done via benchmarking. The last step is the analysis a business, the external rating focus on the future prospects of the company and its ability to make profits. In order to make sure that the real position of the company is shown, the rating should be renewed annually. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ.p88-90,93] #p#分页标题#e#
指导金融论文The rating grades of these agencies range from AAA which is the best category and to the worst grade, which is D where nobody would invest. Rating ranging from AAA to BBB- are investment grade rating and ratings ranging from BB+ to D are speculative grade ratings, which require high yields in order to attract investors.[Speicher,Michael.2001.Advance of the Capital supply,p14] For the purposes of Basel Ⅱ these rating categories are translated into risk weightings, resulting in four basic risk categories. When banks use external ratings, the internal process they used is called the Standardized Approach (SA) [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p92]
3.1.1 Advantages of the external rating
Using one of those companies brings the following advantages. The companies have a lot of experience, as they began with rating in the first half of the 20th century. Due to their long-standing existence, rating companies have big statistical databases at their disposal. As the above-mentioned rating agencies operate in most countries all over the world they cover basically the world market. The large agencies are highly accepted by the market participants and seen their results are seen as reliable.[Jeckle,Michael and Rudolf Stickler. 2003. External Rating- Standardized Approach in the capital market.P73-94]
Additionally companies might be more open to an independent institution than to a business partner like a bank. Rating agencies publish their ratings regularly, making it easy and cheap for third parties to obtain those results as the rating itself is usually paid by the company which is being rated. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p93] A good rating can therefore help a company attracting new national as well as international suppliers or clients and good long-term conditionals can be negotiated.
3.1.2 Disadvantages of the External Rating
A problem can arise if the rating method cannot be properly integrated in the credit risk management of the bank. Most small and medium-sized enterprises cannot afford an external rating, as they are pretty expensive, and therefore the banks have to undertake the rating themselves. Looking at the enterprise structure in China with a huge number of SMEs one finds out that external rating are generally of less importance.[ 张明，2008:《武汉金融》2月期] There is little differentiation among a risk weight of 100%, which means the bank has to keep 8% of the loan as equity, but as the rating of this company could be below BB-, this does not reflect the full risk a bank is facing.[Crouhy, Michel. ,2003, “Internal Rating Systems and Credit Risk Modeling”]
3.1.3 Cost of External Ratings
As mentioned above, letting a rating agency carry out a rating is quite expensive for a company. The average cost for a rating ranges between 60,000 and 100,000 Dollars. The total cost of a rating is made up of a fixed amount and from the volume of emission, whereas the complexity of the analysis is irrelevant for the cost. All following ratings are less expensive than the first one.[Everling,Oliver.2005. External Rating in Basel II. P67-88]#p#分页标题#e#
银行风险论文范文3.1.4 SME Rating Agencies
A rating agency for SMEs would create new possibilities for the companies. They would benefit in various field. One field where they would benefit if they want to go to public, as the risk of the enterprise is already known. Also when the acquisition of shareholding is planned the company might benefit. When conducting e-commerce business, where the buyers do not know the company, a rating is like the business card for companies. A rating is also useful for communication with the public, new employees and investors. When a company plans to get sources of the capital market, a rating is absolutely essential to attract investors. When a company plans to enter into a co-operations or joint ventures its negotiation basis is much better with a good rating. It can also be useful for negotiation with credit institutions.[Speicher,Michael.2001. small-scale business promotion.p3-18]
However beneficial an external rating might be for an SME, the benefit for the use of Basel II is not given. As mentioned in section 3.1.1, external rating by Moody’s, Standard &Poor’s and Fitch are highly accepted by the market due to their long experience and huge databases[Jeckle, Michael and Rudolf Stickler.2003. External Rating-Standard Accord in the capital market.p73-94] A newly founded rating agency would have neither of those two advantages. The major problem for SME rating agencies is that they are not admitted as external rating agencies for the purpose of Basel II. According to the Banking Committee on Banking Supervision (BCBS), there are six criteria which are to be met in order to quality for an external rating agency for Basel II ratings. Those are objectivity, independence, international access and transparency, disclosure (information concerning the assessment methodologies), resources and credibility.[BCBS. 2006. International Convergence of Capital Measurements and Capital Standards-A Revised Framework, Basel Committee Publication no 128,p27-28] As there have not been many SME rating agencies prior to the introduction of Basel II, the newly founded rating would in all likelihood not operate international, but only domestic and would not dispose of enough to gain sufficient market acceptance.
3.2 Internal Rating
For the purposes of this paper internal ratings are by far more important than external ones, as SMEs are usually not rated by external agencies. Internal ratings are done by the bank itself. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p98] If there is already a relationship between bank and customer, the bank can evaluate the customer, which could be especially beneficial for SMEs with a low equity ratio.
In order for a bank to quality to install their own rating system, the following two criteria have to be met. The bank has to have a precise rating method, including at least 8 risk classes. For different types of customers different methods have to be used. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p98] The rating method used for the internal rating is the IRB(Internal Rating based) approach. For corporations which are the most important segment of the customer types mentioned above, including two different kinds of corporations, those being big corporations and SMEs and enterprises which are allocated to the retail segment. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p100] The segment of corporations further includes five types of special financing, which are project financing, object financing, commodities finance, income producing real estate and high volatile commercial real estate. [BCBS. 2006. International Convergence of Capital Measurements and Capital Standards-A Revised Framework, Basel Committee Publication no 128,p54] #p#分页标题#e#
There are two types of IRB, which are a basis approach, called foundation internal rating based (FIRB) and an advanced approach, referred as advanced internal rating based approach(AIRB). There are five central parameters used for both approaches which are the probability of default (PD), the loss given default (LGD), the exposure at default (EAD) and the maturity (M) and size(S) measured with the annual turnover. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ]
Banks using the FIRB do not calculate all of the parameters themselves, they only calculate the PD, and all other estimate are given by the supervisory board and can only be adjusted if certain securities are available.[Cluse, Michael and Tobias Stellmacher. 2005 The IRB Analysis. P167-208] The time series for the PDs is a five years.[Ahlfeld, Christian. 2003. consequence of the credit risk management,p144] Using the advanced approach, banks do not only calculate the PD themselves but also their own estimates for LGD and EAD as well as calculating M.[BCBS. 2006. International Convergence of Capital Measurements and Capital Standards-A Revised Framework, Basel Committee Publication no 128,p59] The time series has to be, according to the supervisory board, seven years. [Ahlfeld, Christian. 2003. consequence of the credit risk management,p144]
3.2.1 Internal rating and SME
There are a number of special treatments for SMEs. For enterprises, which have a yearly turnover between 6 and 60 million Dollars for calculation the minimum capital to be held by banks, there is an adjustment according to the size of the wnterprise.[Behr and Fischer 2005, Basel Ⅱ and controlling.p47] The minimum capital can be lowered to up to 20%. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p100] Additionally a loan which is below 1.2 Dollars is classified as retail credit, which again means a significant reduction of the minimum equity held by banks. [Behr and Fischer 2005, Basel Ⅱ and controlling.p47] The balance sheet is only examined when a loan is demanded first, afterwards the financial statements have to be handed in early enough, but unless there are difficulties for the enterprises or the company becomes a small enterprises, they are not checked. [Bruckner, Bernulf and Hans Hammerschmied. 2003. Basel Ⅱ,p35]
⒋Change in Financial Ratios and Their Implication for Ratings
4.1 The simulation tool: Company Check
The simulation tool Company Check, which has been developed by the company aims to help tax consultants and auditors when analyzing company-specific data from the financial accounting department. Using this data it can also calculate a rating for the company, which is similar to the internal rating of a bank for Basel Ⅱ purposes. [DATEV.2008.Company-Check,Version 3.3. Vienna: DATEV Austria.b]
There are seven ratios which are used to compare the company’s development. Those are the equity ratio, the annual result, the ordinary operating result, total return on investment, cash flow, outside capital and dynamic debt ratio. An overview of how the ratios are calculated and their interpretation is below.#p#分页标题#e#银行风险信用评估论文Equity ratio=
The high the equity ratio the better it is for the enterprises as the risk of default is reduced. If the Equity ratio is below 8% this is seen as an alert according to the enterprises reorganization law and indicates that a company needs reorganizational action. If the equity ratio is too low, it can be increased through additional paid-in capital, reduced future personal drawing, and reduction of assets like inventories and accounts receivables or factoring.
Total Turnover on Investment=
The higher the return on investment, the better it is. The total ROI measured the efficiency of all investments undertaken.
Dynamic Debt Ratio=
A low dynamic debt ratio is desirable for the company, as that indicates that the business id relatively less dependent on its creditors. A low ratio is seen as a sigh for financial stability.
4.2 Summary and Findings
Generally a high equity ratio (and low debt) is always good for a company. But too much equity might not be efficient for a company, as mostly equity is more expensive than debt. Additionally the total return on investment should be high. However, the Dynamic Debt Ratio should be low. If it was high, the company is strongly dependent on external parties, as most of the company’s money comes from the external resources.
However, the results of the ratings above should never be at in isolation. For every ratio it should be determined why these changes have been occurring and if that is good or bad for the company. However it is proven that also for small and medium-sized companies it makes sense to take care of the financial statements to get a better rating and therefore cheaper debt.
⒌Conclusion
If an entrepreneur pays some time in thinking about how to improve his/her balance sheet, the company can save if it needs loan financing. However, in the real world, not only the financial statements are used to determine the rating, but also the book-keeping and the soft facts. Another factor is that the company is never evaluated in isolation, but there are benchmarks and industry comparisons. According to the particular industry the evaluation of ratios varies, as there are industries with, for example higher debt amounts than usual. In the program it is possible to also compare with the specific industry.
Using the program Company Check revealed some of its advantages as well as disadvantages. It is very useful for the entrepreneur or manager because when using the tool to get a rating for the company, he/she has a basic idea of the company’s position. This knowledge can be used to prepare better for the conversation with the customer advisor of the bank.
The program has a lot of different applications and views. This makes it very comprehensive on the one hand but at the same time confusing and complicating on the other hand. Entrepreneurs therefore have to choose themselves if Company Check adds enough value to the company to train a person to work with the program or to take some of the entrepreneur’s time.#p#分页标题#e#
http://www.ukassignment.org/liuxueshenglunwen/2011/1031/17762.htmlTo conclude, an entrepreneur should always inform himself/herself about the ratios calculated by his/her specific company, to find out where most attention has to be paid. A good relation to the customer advisor might be beneficial to get additional information on the weighting or at least on the importance of each ratio.
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