Learning Objectives
By the end of this module, you will be able to:
Understand the Structure and Purpose of Statement of Profit or Loss
Identify key components including revenue, cost of goods sold (COGS), operating expenses, net profit, and EBITDA.
Understand how the Profit or Loss Statement connects with the Balance Sheet and Cash Flow Statement.
Analyse Revenue and Expense Trends to Evaluate Business Performance
Assess revenue sustainability, seasonality, and customer concentration risks.
Distinguish between fixed and variable costs and assess how well the business manages its expenses.
Identify non-recurring or abnormal items that may distort financial performance.
Apply Profitability Ratios to Support Financial Analysis
Calculate and interpret key ratios like Gross Profit Margin, Net Profit Margin, and EBITDA Margin.
Use ratios trends to evaluate trading strength and operational efficiency.
Identify early warning signs that may affect the client’s debt servicing capacity.
Assess Trading Losses and Normalise Earnings
Understand causes of trading losses and their impact on debt servicing capacity.
Normalise earnings by adjusting for non-recurring income and expenses.
Evaluate whether losses are temporary or structural and if credit mitigants are required.
Assess Debt Servicing Capacity and Lending Risk
Apply metrics such as Interest Cover Ratio (ICR) and Debt Service Coverage Ratio (DSCR) to assess a client’s ability to meet debt obligations.
Identify financial risks and potential covenant breaches.
Make sound, responsible credit recommendations based on financial performance..
