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Culture Documents
Knowwhoyouareworkingwith
StrivingtoeducateandconsultSmallBusinessandMiddleMarketstohelpcreatejobsfor
ourfellowAmericans
FinancialModelingforSBALoans
WhatSmallandMiddleMarketBusinessesneedtoknow,and
whatfinancialstatementanalysismeans
By
SokH.CordellSr.ManagingDirector
TableofContents
FinancialModel
WhyFinancialModelisneeded?
Whatisafinancialmodel?
FinancialModelingforSBA,Whatisneeded?
FinancialModelingforSBALoan
RealisticFinancialModel
FlexibleFinancialModel
FinancialStatementAnalysis
IncomeStatement
OperationalIncome
BalanceSheet
GlobalIncomeStatement
GlobalBalanceSheet
GlobalOperationalIncome
HorizontalBalanceSheet
UniversalCreditAnalysis
KeyEarningsMeasures
RMAComparisonCommonSize
RMAComparisonRatio
FinancialGrowthEvaluation
DuPontAnalysis
ROAReturnonAssets
RatioAnalysisYeartoYear
TotalConsolidatedFinancialSummary
TableofContentsContinued
Valuation
PresentValue
CapitalAdjustedEarningValuation
DiscountFutureEarningsValuation
GrossMultiplierValuation
FinancialStressTest
StaticStressTest
StaticStressTestIncomeStatement
StaticStressTestBalanceSheet
GlobalStaticStressTestIncomeStatement
GlobalStaticStressTestBalanceSheet
DynamicStressTest
DynamicStressTestonOperatingIncome
DynamicStressTestonNetIncomeSimulation
RandomDistributionfordynamicstresstest
ScenarioandSensitivityDistribution
MonteCarloSimulationonNormalFittingdistribution
InterestRateRiskandSwaps
ReturnonCapitalforBanks
RiskAdjustedReturnOnCapital
InterestRateSwapforBanksforHedging
InterestSwapModelforBanks
SimulationonStochasticInterestRateSwapModel
Vasicek ModelforInterestRateSwapModel
CIRFinancialModelforInterestSwap
FINANCIALMODELINGFORSBA
Section
FINANCIALMODEL
WhyisFinancialModelneeded?
FinancialModelisawaytheCreditAnalystcancommunicatewiththeLendingorFinancial
Institutiontomovetheloanpackagethroughthesystemtoreceivecreditapprovalonaloan
FinancialModelhastotakeaccounttheIncomeStatement,BalanceSheet,CashFlow,andall
theverticalandhorizontaltesttodetermineriskassociatedwiththeloan.
IsthereastandardintheSBA?Yestoadegree.SinceSBAchangedtheguidelinesfrom
lending$2MMto$5MM,differenttypesofloansareenteringthemarket.
TheaverageloansizeforSBAloansareusuallyaround$1.26MM,whichusuallyhaveoneor
twoaffiliateentities,butwhenthenewrulesforhigherloanamount,thecreditanalystare
nowreviewingcomplextaxreturnswithupto10affiliateentities,whichmayormaynot
haveinterrelatedcompanyfinancials,whichismorecomplicatedthentheloanpackage
receivedpriortotheSBAloanlimitchanges
CHCapitalPartnersLLCbelievewemayhaveasolutionforcommongoodtohelpsmall
businessandmiddlemarketclientscreatejobssoourfellowAmericans.
Ifthemarketdoesnotchangeandstartadaptingtonewtechnologiesandnewwayof
reviewingfinancialstatements,packaging,andprocessingSBAloans,wewillcausethesmall
businessandmiddlemarketclientsnottobeabletocreatejobs.
Weaspartofthesolutionneedtohaveabetterwaytoanalyzethefinancialpackagesand
cometoabettersolutionstocommunicatethesecomplexfilestooneanother.Emailhas
becometheprimarymethodofcommunicatingfinancialpackages.Sincemanybankers
receive100to300emailsperday,thedelayisinevitablebecausethemarketcannotprocess
thatmanyemails,properfinancialmodelingandpackagingisthesolution
WhatisFinancialModel?
AFinancialModelistohelpcredit
UnderwritersorAnalystillustrate
therelationshipofinterpretingthe
borrowersfinancialtaxreturnor
financialstatementstodetermineif
theSBAloanisviabletotakethe
risktolendwiththegovernment
guarantee
UseProperMethodstodetermine
liquidationvalue,discountcash
flow,vertical,horizontal,ratios,
collateralanalysistofiguretherisk
thatafinancialinstitutioniswilling
totakeonrisk
Financialand
AccountingTheory
GAAPPrincipals
Financial
Relationshipsof
IncomeandBalance
Sheet
ToDetermineTrue
CashFlowand
EarningsStrengthof
thecredit
FinancialModel
FinancialModelingforSBA Whatisneeded?
ModelExample
Amodelspecificrelationshipshouldbeinput
andoutputs
IncomeStatement,BalanceSheet,ARandAP
analysishastobemodeledcorrectlyforthe
rightoutput.
FurthermoreExcelskillsareneededtofully
comprehendthefinancialmodelthatis
neededtobuildbothsubjectfinancialmodel
andglobalfinancialmodel.
FinancialModelisaskill,butittakesolutions
tocreatetherightone
Stresstestswithstaticnumbersarenot
realisticinnature:exampleiftheinterestrate
inpaymentwillriseby2%,todayprimeisat
3.25%andifthestresstestisbasedonraising
thepaymentwithincreaseinrateof2%,that
isnear60%increasetorate,highly
improbableoutcome,sothereforetherehas
tobeabetterormorereasonablemethodof
stresstestingasubjectloan.
MonteCarloSimulationandStochasticStress
testwilldeterminethefuturevalueofthe
company,orwillhelpfigureoutthestrength
andweaknessofthecreditforthefutureof
thesubjectloan
Input
IncomeStatement
BalanceSheet
Ratios
MonteCarloSimulation
ZTest
StressTest
WorkingCapital
Variousothertestto
determineRisk
StochasticModel
ARandAPanalysisneedsto
bedeterminedcorrectlyto
determinethemost
accuratefinancialmodel
StressTest
RiskTesthasbothStaticand
DynamicStresstotruly
Determinerisk,raising
interestrateisjustonetype
ofstresstest
FinancialModelforSBALoans
Characteristicsofagoodfinancialmodel
Realistic
ErrorFree
Flexible
Easytouse
Easytounderstand
Canbeaudited
Knowwhattheoutcomeofthemodel
BasicunderstandingofGAAP
BasicKnowledgeofExcel
CompleteunderstandingofBookValue,BookEarnings,M1andM2
reconciliation
AdvancedknowledgeofAssetsandLiabilityforthetruenatureofcash
flow
RealisticFinancialModel
Realistic
Assumptions,relationship,inputs,andmodelmustberealisticsotheoutputsareusablefor
thecreditanalystinthemarketplace
Examples:
Ifaborrowerhasanegativeequityinthebalancesheet,itcanmeanmanydifferent
things.Onecouldmeanthatthebusinessowneristakingdistributionsfromthebusiness
withoutactuallymakingprofit;butalsoitcouldmeanthattheborrowercouldhave
boughtthepropertyforbelowfairmarketvalueortheremaybearelationshipof
depreciationoraccelerateddepreciationthatmayhaveoccurred.
Dependingonthecreditexperienceofthecreditanalyst,heorshemayhaveneverseen
aclientwith10affiliateentitieswithintercompanyrelatedfinancials,auditingaclient
with11differenttaxreturnsofaffiliates,andalsohavingtheinterrelatedfinancials,are
farmorecomplexthenyourtypicalSBAloans,sobuildingafinancialmodelforacomplex
situationisquitedifficultandtimeconsumingforthecreditanalystofacommunity
banks
Furthermore,howwelldoestheSBAsunderwritingreviewtheglobalfinancialpicture,
wearenottalkingabouteligibility,wearetalkingaboutthetrueglobalcashflow,notthe
simplecashflow,truecashflowthattakesalltheassetsandliabilitiesoftheaffiliatedto
combinethetruecashflowgloballyandalsoindividually.
Sowhenthenewwaveofborrowersarecomingintothemarketrequestingtorefinance
orbuyabusiness,areweservicingthemintheproperfinancialmodelsorarewetrying
toforcethesewealthierindividualsonthefinancialsmodelsthatwerebuiltfor$2MM
limitSBAloans.
FlexibleFinancialModel
Flexible
Isthecurrentfinancialmodelsimpleforthecreditanalysttoreview,itwouldhavebeensimple,butifyou
have10affiliates,isitpracticaltohaveaexcelfinancialmodelwithincomestatement,balancesheet,
universalcashflow,operationalcashflowinalldifferenttabs.
AveragefinancialmodelforSBAloanshaveabout6tabs,ifaclienthas10affiliates,woulditbepracticalfor
acreditanalysttoreview60tabfinancialmodel?Probablynot.Mostcreditanalystdonotreceiveenough
compensationtodothattypeofwork.
Wearewhatwesee,ifSBAhasnotseenafinancialmodelwith10or15affiliates,thenhowcanweexpect
thecreditanalysttounderstandaLBO(LeverageBuyOut)FinancialModel,ifthecreditanalystisusedto
seeingoneortwoaffiliatesatthemost,youcannotbuildafinancialmodelwith60tabs,itwillneverwork.
Thefinancialmodelshouldexplainthecredit,affiliatesummaries,financialauditingcapabilitiesforthe
creditanalysttounderstandthedealandinterpretthecreditaccordingtotheinstitutionthatheorshe
mayworkfor,soitwouldbethatmuchfasterthatthecreditanalystgothroughthethoroughcreditmodel
todetermineifitisinthelendingpolicyofthefinancialinstitution.
FinancialModelshouldanswerallthefollowingquestions,eligibility,typeofloan,structureoftheloan,
creditandcharacteroftheborrower,collateralanalysis,liquidationpoliciesincaseofdefault,stresstesting
bothstaticanddynamicusingMonteCarlosimulation,maybebothrandomandhistoricalsampling.
OftenthereisadisconnectbetweenwhattheCCOislookingforincreditvs.whatthecreditanalystis
capableofinterpretingthecredit,soifSBAislookingforstrongerborrowers,thecreditanalystneedstore
traintheircreditandaccountingskillstogetthehigherqualityofassetsthatareavailableinthemarket
place.Therearemanyhighqualityloansinthemarketplace,buttheCreditAnalystmayneedtore
educateonthenewtaxrulesandunderstandthemoresophisticatedtaxdeferralstrategiesthatWealthier
clientswhoareneedingcapitalfromSBAloans.
Weareresponsibleforhelpingsmallbusinessandmiddlemarketretaincreditsotheycancreatejobsfor
ourfellowAmericans.
FINANCIALMODELINGFORSBA
Section
FINANCIALSTATEMENT
IncomeStatement
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
INCOMESTATEMENT:
TaxReturn
12
12/31/2008
$
%
TaxReturn
12
12/31/2009
$
%
TaxReturn
12
12/31/2010
$
%
InternallyPrepared
12
12/31/2011
$
%
Projection
12
12/31/2012
$
%
NAICS
Statistics
NetSales
CostofSales
GrossProfit
8,304.0
1,483.0
6,821.0
17.9%
82.1%
7,454.0
1,630.0
5,824.0
21.9%
78.1%
7,725.0
1,124.0
6,601.0
14.6%
85.4%
7,528.0
1,104.0
6,424.0
14.7%
85.3%
8,304.0
1,104.0
7,200.0
13.3%
86.7%
100.0%
100.0%
0.0%
OfficerCompensation
Wages
Rent
Depreciation
Interest
OtherOperatingExpenses
TotalExpenses
0.0
2,780.0
0.0
623.0
538.0
2,096.0
6,037.0
0.0%
33.5%
0.0%
7.5%
6.5%
25.2%
72.7%
0.0
2,998.0
0.0
532.0
531.0
1,936.0
5,997.0
0.0%
40.2%
0.0%
7.1%
7.1%
26.0%
80.5%
0.0
1,981.0
0.0
532.0
524.0
3,043.0
6,080.0
0.0%
25.6%
0.0%
6.9%
6.8%
39.4%
78.7%
0.0
2,009.0
0.0
532.0
524.0
2,680.0
5,745.0
0.0%
26.7%
0.0%
7.1%
7.0%
35.6%
76.3%
0.0
1,981.0
0.0
532.0
524.0
2,500.0
5,537.0
0.0%
23.9%
0.0%
6.4%
6.3%
30.1%
66.7%
0.0%
0.0
349.0
435.0
516.0
81.0
0.0%
4.2%
5.2%
6.2%
1.0%
0.0
0.0%
352.0
4.7%
525.0 7.0%
225.0
3.0%
750.0 10.1%
0.0
306.0
215.0
224.0
9.0
0.0%
4.0%
2.8%
2.9%
0.1%
0.0
306.0
373.0
225.0
148.0
0.0%
4.1%
5.0%
3.0%
2.0%
0.0
306.0
1,357.0
225.0
1,132.0
0.0%
3.7%
16.3%
2.7%
13.6%
OtherIncome
ManagementFee5%
Income(Loss)BeforeTaxes
IncomeTax
NetIncome(Loss)
0.0%
0.0%
0.0%
DividendsPaid
IncomeStatement
Operations
ShouldbeItemizedtohelpdetermineifthecompanyisprofitableornot
Thefigureinthetabledoesnotcategorizetheexpenses,sowhenaddingittogether,creditanalystmaynot
fullcomprehendthenatureofthebusiness
Depreciation,interestrateexpense,wages,andofficerscompensationmaybeapplicableforoneentity
borrowers,buttheincomestatementfailsifyouhavetoreviewmultipleaffiliates,becauseitisinthedetails
ofthebreakdown,wherecreditanalystreallyneedtodothework.
OperationalCashFlow
OperationalCash
Depreciation/Amort.
+InterestExpense
+RentalExpense
+Other:Owner'sDraw
ManagementFee5%
=AvailableCash
ExistingDebtService
InterestonLine
PrincipalonLine
NewDebtService
Other:
=Surplus
CoverageRatio
435.0
623.0
538.0
0.0
0.0
349.0
1,945.0
624.0
0.0
0.0
0.0
0.0
1,321.0
3.12
525.0
532.0
531.0
0.0
0.0
352.0
890.0
624.0
0.0
0.0
0.0
0.0
266.0
1.43
215.0
532.0
524.0
0.0
0.0
306.0
1,577.0
624.0
0.0
0.0
0.0
0.0
953.0
2.53
373.0
532.0
524.0
0.0
0.0
306.0
1,735.0
624.0
0.0
0.0
0.0
0.0
1,111.0
2.78
1,357.0
532.0
524.0
0.0
0.0
306.0
2,719.0
624.0
0.0
0.0
0.0
0.0
2,095.0
4.36
OperationalCashFlow
OperationalCashFlowforDebtService
5.00
3,000.0
4.00
2,000.0
3.00
1,000.0
2.00
0.0
1/1/2008
1/1/2009
1/1/2010
1/1/2011
1/1/2012
1,000.0
1.00
0.00
OperationalCash
CashAvailableforDebtService
ExistingDebtService
SurplusIncomeafterDebtService
DebtServiceCoverageRatio
DSCR
AddBackitemstoreflecttrue
cashflow
ThenewDebtService
Anyotherinterest
Forbankloan,youneedto
addbackmanagementfee,
andbookfactor1.5or2on
thecreditreport.ForCMBS
credit,youneedtousethe5%
formanagement.
Operationalcashflowalso
determineswhichitemsare
fortaxdeferralortax
minimizationstrategiesforthe
subjectbusinessorproperty.
InthecaseforSBA,
operationalcashflowis
importanttodeterminethe
truenatureofcashflow
BalanceSheet
TypeofStatement
#ofMonths:
DateofStatement:
TaxReturn
12
12/31/2008
(InThousands)
ASSETS
Cash&Securities
Receivables
Inventory
Other
TaxReturn
12
12/31/2009
%
TaxReturn
12
12/31/2010
%
InternallyPrepared
12
12/31/2011
%
Projection
12
12/31/2012
NAICS
Statistics
1,400.0
341.0
114.0
224.0
16.9%
4.1%
1.4%
2.7%
83.0
498.0
107.0
316.0
1.2%
7.2%
1.6%
4.6%
212.0
516.0
123.0
0.0
3.5%
8.5%
2.0%
0.0%
212.0
0.0
0.0
0.0
4.4%
0.0%
0.0%
0.0%
2500.0
0.0
0.0
0.0
38.6%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
CurrentAssets
2,079.0
25.1%
1,004.0
14.6%
851.0
14.0%
212.0
4.4%
2,500.0
38.6%
0.0%
Land
Buildings
LessDepreciation
NetFixedAssets
LongTermAssets
500.0
7,900.0
2,202.0
6,198.0
6,198.0
6.0%
95.4%
26.6%
74.9%
74.9%
500.0
8,056.0
2,690.0
5,866.0
5,866.0
7.3%
117.3%
39.2%
85.4%
85.4%
500.0
8.2%
7,686.0 126.6%
2,967.0 48.9%
5,219.0 86.0%
5,219.0 86.0%
500.0 10.5%
7,342.0 154.0%
3,287.0 69.0%
4,555.0 95.6%
4,555.0 95.6%
500.0
7.7%
7124.0 110.1%
3654.0 56.5%
3,970.0 61.4%
3,970.0 61.4%
0.0%
0.0%
0.0%
TOTALASSETS
8,277.0 100.0%
6,870.0
100.0%
6,070.0 100.0%
4,767.0 100.0%
6,470.0 100.0%
0.0%
LIABILITIES
NotesPayable
AccountsPayable
Taxes
Other
CurrentLiabilities
BalanceSheet
BookValue
CostBasis
FairMarket
BalanceSheet
9,000.0
1,000.0
8,000.0
500.0
625.0
270.0
516.0
288.0
6.0%
2.6%
5.0%
2.8%
625.0
327.0
224.0
0.0
9.1%
4.8%
3.3%
0.0%
625.0
359.0
224.0
0.0
10.3%
5.9%
3.7%
0.0%
615.0
350.0
224.0
0.0
10.0%
5.7%
3.6%
0.0%
615.0
350.0
224.0
0.0
9.5%
5.4%
3.5%
0.0%
0.0%
0.0%
0.0%
0.0%
7,000.0
0.0
6,000.0
500.0
5,000.0
1,000.0
1,699.0
16.4%
1,176.0
17.1%
1,208.0
19.9%
1,189.0
19.3%
1,189.0
18.4%
0.0%
4,000.0
1,500.0
3,000.0
2,000.0
2,000.0
2,500.0
1,000.0
3,000.0
0.0
3,500.0
LongtermDebt
8,185.0
78.8%
8,065.0
117.4%
7,965.0 131.2%
7,865.0 127.5%
7565.0 116.9%
0.0%
LongTermLiabilities
8,185.0
78.8%
8,065.0
117.4%
7,965.0 131.2%
7,865.0 127.5%
7,565.0 116.9%
0.0%
TOTALLIABILITIES
9,884.0
95.2%
9,241.0
134.5%
9,173.0 151.1%
9,054.0 146.7%
8,754.0 135.3%
0.0%
NETWORTH
PartnersCapital
CapitalSurplus
RetainedEarnings
(TreasuryStock)
109.0
299.0
90.0
0.0
1.0%
2.9%
0.9%
0.0%
1,284.0
1,354.0
267.0
0.0
18.7%
19.7%
3.9%
0.0%
650.0
1,723.0
730.0
0.0
10.7%
28.4%
12.0%
0.0%
350.0
2,534.0
0.0
0.0
5.7%
41.1%
0.0%
0.0%
250.0
2534.0
0.0
0.0
3.9%
39.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
TOTALNETWORTH
498.0
4.8%
2,371.0
34.5%
3,103.0
51.1%
2,884.0
46.7%
2,284.0
35.3%
0.0%
10,382.0 100.0%
6,870.0
100.0%
6,070.0 100.0%
6,470.0 100.0%
0.0%
TOTALLIAB&NETWORTH
6,170.0 100.0%
CurrentAssets
LongTermAssets
CurrentLiabilities
LongTermLiabilities
TOTALNETWORTH
GlobalIncomeStatement
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
INCOMESTATEMENT:
NetSales
CostofSales
GrossProfit
TaxReturn
TaxReturn
12
12/31/2008
$
TaxReturn
12
12/31/2009
$
TaxReturn
12
12/31/2010
$
12
12/31/2011
$
13,395.0
4,495.0
8,900.0
14,742.0
5,790.0
8,952.0
14,299.0
5,549.0
8,750.0
14,683.0
5,976.0
8,707.0
OfficerCompensation
Wages
Rent
Depreciation
Interest
OtherOperatingExpenses
TotalExpenses
122.0
3,933.0
963.0
534.0
353.0
1,384.0
7,289.0
320.0
3,892.0
903.0
483.0
355.0
1,595.0
7,548.0
789.0
3,290.0
873.0
409.0
278.0
1,594.0
7,233.0
647.0
3,327.0
749.0
387.0
244.0
1,616.0
6,970.0
OtherIncome
OtherExpenses
Income(Loss)BeforeTaxes
IncomeTax
NetIncome(Loss)
0.0
58.0
1,553.0
0.0
1,553.0
38.0
215.0
1,227.0
0.0
1,227.0
18.0
235.0
1,300.0
0.0
1,300.0
0.0
235.0
1,502.0
0.0
1,502.0
0.0
0.0
0.0
0.0
DividendsPaid
GlobalIncomeStatement
20,000.0
3.50
10,000.0
3.00
0.0
2.50
1/1/2008
1/1/2009
1/1/2010
1/1/2011
NetIncome
TotalExpense
NetIncomeAfterTax
OperatingCashAvailableforDebtService
IncomeAfterGlobalDebtService
NetIncome
CostofGoodsorCostofSales
GrossProfit
OfficersCompensation
Wages
Rent
InterestExpense
Incomebeforetax
Incomeaftertax
DividendPaid
M1andM2ReconciliationonBook
Earnings
OtherExpense
OtherIncome
GlobalBalanceSheet
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
ASSETS
Cash&Securities
Receivables
Inventory
NotesReceivable
Prepaids
Other
TaxReturn
TaxReturn
12
12/31/2008
$
TaxReturn
12
12/31/2009
$
12
12/31/2010
$
2,117.0
610.0
419.0
0.0
0.0
0.0
1,429.4
984.0
443.0
0.0
0.0
0.0
2,516.5
558.0
305.0
0.0
0.0
79.0
CurrentAssets
3,146.0
2,856.4
3,458.5
Land
Buildings
Machinery&Equipment
Furniture&Fixtures
Autos&Trucks
OtherFixedAssets
LessDepreciation
NetFixedAssets
IntangibleAssets(net)
Other
1,375.0
6,402.0
0.0
350.0
11.0
438.0
1,836.0
6,740.0
575.0
95.0
1,375.0
6,507.0
0.0
418.0
11.0
475.0
2,326.0
6,460.0
604.0
99.0
1,375.0
6,737.0
0.0
455.0
11.0
495.0
2,681.0
6,392.0
628.0
69.0
LongTermAssets
7,410.0
7,163.0
7,089.0
10,556.0
10,019.4
10,547.5
TOTALASSETS
LIABILITIES
NotesPayable
AccountsPayable
Taxes
PrivateLender(curr)
SBA(curr)
Accruals
Other
GlobalBalanceSheet
GlobalConsolidatedFinancialsshouldbe
analyzedthesamewayasthesubjectproperty
NeedtoreviewtheNetWorth
Needtoreviewglobalcurrentliabilitiesandlong
termliabilities
LoansfromInterrelatedcompanies
GlobalBVBalanceSheet
8,000.0
838.0
257.0
345.0
30.0
0.0
0.0
84.0
857.0
446.0
403.0
0.0
0.0
0.0
65.0
834.0
555.0
280.0
0.0
0.0
0.0
303.0
CurrentLiabilities
1,554.0
1,771.0
1,972.0
LongtermDebt
PrivateLender(LT)
SBA(LT)
SubordinateOfficer
LoansfromStockholders
Other
4,566.0
0.0
0.0
0.0
576.0
40.0
4,303.0
0.0
0.0
0.0
582.0
0.0
4,733.0
0.0
0.0
0.0
616.0
0.0
LongTermLiabilities
5,182.0
4,885.0
5,349.0
TOTALLIABILITIES
6,736.0
6,656.0
7,321.0
NETWORTH
CommonStock
CapitalSurplus
RetainedEarnings
(TreasuryStock)
2,607.0
129.0
1,023.0
526.0
2,077.0
236.6
763.0
861.0
2,015.0
86.5
585.0
580.0
TOTALNETWORTH
4,027.0
3,464.4
3,093.5
10,763.0
10,120.4
10,414.5
TOTALLIAB&NETWORTH
4,500.0
7,000.0
4,000.0
6,000.0
3,500.0
3,000.0
5,000.0
2,500.0
4,000.0
2,000.0
3,000.0
1,500.0
2,000.0
1,000.0
1,000.0
500.0
0.0
0.0
1/1/2008
GlobalCurrentAssets
1/1/2009
GlobalLongTermAssets
GlobalLongTermLiability
GlobalTotalNetWorth
1/1/2010
GlobalCurrentLiabilities
GlobalOperationalCashFlow
TypeofStatement
TaxReturn
TaxReturn
TaxReturn
InternallyPrepared
#ofMonths:
12
12
12
12
DateofStatement:
12/31/2008
12/31/2009
12/31/2010
12/31/2011
OperationalCash
1,553.0
1,227.0
1,300.0
1,502.0
Depreciation/Amort.
534.0
483.0
409.0
387.0
+InterestExpense
353.0
355.0
278.0
244.0
+RentalExpense
144.0
355.0
144.0
0.0
+Other:Owner'sDraw
102.0
157.0
129.0
129.0
+Other:
506.0
102.0
867.0
823.0
=AvailableCash
3,192.0
2,679.0
3,127.0
3,085.0
ExistingDebtService
437.0
437.0
485.0
485.0
Other:OwnersDraw1.5Facto
500.0
500.0
500.0
500.0
=Surplus
2,255.0
1,742.0
2,142.0
2,100.0
CoverageRatio
3.41
2.86
3.17
3.13
3,500.0
3.60
GlobalCashFlow
3,000.0
3.40
2,500.0
3.20
2,000.0
3.00
1,500.0
2.80
1,000.0
2.60
500.0
2.40
0.0
1/1/2008
1/1/2009
1/1/2010
1/1/2011
GlobalOperationalCashFlow
GlobalCashAvailableforDebtService
GlobalExistingDebtPayments
GlobalOwnersDraw1.5%ofCreditReportObligation
GlobalIncomeafterDebtService
GlobalDebtServiceCoverage
GlobalOperationalCashFlow
Majorpartofunderwriting
thecombinedriskexposer
oftheborrower
Viewrelationshipsbetween
oneormanycompaniesand
howitmayaffecttheability
oftheborrowerstopay
mortgage
Answersiftheglobalisa
positiveoranegativetothe
subjectloan
HorizontalBalanceSheetAnalysis
BalanceSheetsSummary
ASSETS
TotalCurrentAssets
%
NetFixedAssets
%
NetIntangibleAssets
%
TotalOtherNoncurrentAssets
%
TotalAssets
%
LIABILITIES&STOCKHOLDERS'EQUITY
TotalCurrentLiabilities
%
TotalLongTermDebt
%
TotalLiabilities
%
Stockholders'Equity:
Additionalpaidincapital(preferred)
%
Commonstock
%
Additionalpaidincapital(common)
%
Retainedearnings
%
(Treasurystockcommon)
%
TotalStockholders'Equity
%
TotalLiabilities&Stockholders'Equity
%
2008
2009
2010
2011
65
1.94%
3,280
98.06%
0
0.00%
0
0.00%
3,345
100.00%
65
2.03%
3,140
97.97%
0
0.00%
0
0.00%
3,205
100.00%
68
2.19%
3,035
97.81%
0
0.00%
0
0.00%
3,103
100.00%
65
2.13%
2,989
97.87%
0
0.00%
0
0.00%
3,054
100.00%
201
6.01%
2,625
78.48%
2,826
84.48%
201
6.27%
2,567
80.09%
2,768
86.37%
201
6.48%
2,489
80.29%
2,690
86.77%
201
6.58%
2,401
78.62%
2,602
85.20%
0
0.00%
144
4.30%
370
11.06%
5
0.15%
0
0.00%
519
15.52%
3,345
100.00%
0
0.00%
74
2.31%
262
8.17%
101
3.15%
0
0.00%
437
13.63%
3,205
100.00%
0
0.00%
107
3.45%
292
9.42%
225
7.26%
0
0.00%
410
13.23%
3,100
100.00%
0
0.00%
199
6.52%
447
14.64%
204
6.68%
0
0.00%
452
14.80%
3,054
100.00%
HorizontalTest
Determiningthefinancialhistorical
numbersfromoneperiodtothenext
Determinethetrendofthefinancial
statement,eitheritistrendingupor
downbetweentwoperiodoftime
Assetsareincreasingordecreasing
CurrentLiabilitiesareincreasingor
decreasing
Isthecompanymakingprofitor
drainingownersequity
RetainedEarningsupordown
TotalEquityorStockholdersEquityup
ordown
TotalLongTermAssets,Current
Assets,CurrentLiabilities,LongTerm
Liabilitiesincreasingordecreasing
NetFixedAssets,NetIntangible
Assets,andpaidincapitalincreasing
ordecreasing
UniversalCreditAnalysis
TypeofStatement
#ofMonths:
DateofStatement:
UCA(UniversalCreditAnalysis)CashFlow
OperatingFlows
NetSales
ChangeinReceivables
7,454.0
157.0
7,725.0
18.0
7,528.0
516.0
8,304.0
0.0
CashfromSales
7,297.0
7,707.0
8,044.0
8,304.0
CostofGoods
ChangeinInventory
ChangeinAccountsPayable
1,630.0
7.0
57.0
1,124.0
16.0
32.0
1,104.0
123.0
9.0
1,104.0
0.0
0.0
CashProductionCosts
1,566.0
1,108.0
990.0
1,104.0
5,731.0
6,599.0
7,054.0
7,200.0
G&AExpense
ChangeinAccruals
OtherIncomeorExpense
ChangeinOtherCurrentAssets
ChangeinOtherCurrentLiabilities
ChangeinOtherNoncurrentAssets
ChangeinOtherNoncurrentLiabilities
ChangeinDeferredTax
IncomeTaxesPaid
4,934.0
0.0
352.0
92.0
288.0
0.0
0.0
292.0
225.0
5,024.0
0.0
306.0
316.0
0.0
0.0
0.0
0.0
224.0
4,689.0
0.0
306.0
0.0
0.0
0.0
0.0
0.0
225.0
4,481.0
0.0
306.0
0.0
0.0
0.0
0.0
0.0
225.0
3,000.0
CashOperatingExpenses
6,183.0
5,238.0
5,220.0
5,012.0
2,000.0
NetCashafterOperations
452.0
1,361.0
1,834.0
2,188.0
1,000.0
InterestExpense
DividendsPaid
CurrentPortionLongTermDebt
531.0
0.0
625.0
524.0
0.0
625.0
524.0
0.0
625.0
524.0
0.0
615.0
0.0
TotalFinancingCosts
1,156.0
1,149.0
1,149.0
1,139.0
CashFlowAfterFinancingCosts
1,608.0
212.0
685.0
1,049.0
200.0
115.0
132.0
53.0
FinancingSurplus(Shortfall)
1,808.0
327.0
817.0
1,102.0
ChangeinShortTermDebt
ChangeinLongTermDebt
ChangeinOfficerorStockholderDebt
ChangeinEquity
0.0
120.0
0.0
3,046.0
0.0
100.0
0.0
265.0
10.0
100.0
0.0
511.0
0.0
300.0
0.0
600.0
TotalExternalFinancing
3,166.0
165.0
621.0
300.0
NetCashFlowAfterFinancing
4,974.0
492.0
196.0
1,402.0
BeginningCashPosition
EndingCashPosition
ActualChangeInCash
CashOutofBalanceBy
1,400.0
83.0
1,317.0
3,657.0
83.0
212.0
129.0
363.0
212.0
212.0
0.0
196.0
212.0
2,500.0
2,288.0
886.0
GrossCashIncome
CapitalExpenditures
StartswithCashFlowfromSales
LessCashPaidtoCostofSalesorCostofGoods
LessCashPaidforOperatingExpense
AccountsforCashInflowandOutflow
NetCashfromOperations
UCAAnalysisChart
1,000.0
2,000.0
Changein
CashPosition
3,000.0
2,500.0
2,500.0
1/1/2009
83.0
1/1/2010
1/1/2011
1/1/2012
2,000.0
1,500.0
1,400.0
3,000.0
1,000.0
4,000.0
5,000.0
212.0
6,000.0
7,000.0
83.0
CashOperatingExpense
TotalFinancingCost
FinancingSurplus(Shortfall)
EndingCashPosition
500.0
212.0
212.0
212.0
NetCashAfterOperation
CashFlowAfterFinancingCosts
BeginningCashPosition
0.0
KeyEarningsMeasure
KeyEarningsMeasuresandCashFlowSummary
HistoricNetIncome
Pl us :Incometa xes
EarningsBeforeTaxes(EBT)
Pl us :Interes tExpens e
EarningsBeforeInterest&Taxes(EBIT)
Pl us :Depreci ati on&Amorti za ti on
EarningsBeforeInterest,Depr.&Amort.(EBITDA)
HistoricNetcashflow
His tori ci ncomefromopera ti ons
Les s :Ta xbas edons el ectedta xra te
Pl us :Depr.&a mort.fromoper.(netofta x)
Les s :Fi xeda s s etpurcha s es
Les s :Cha nges i nnetworkingca pi ta l
FreeCashFlowavailabletoTotalInvestedCapital(FCFTIC)
His tori cNetIncome
Pl us :Depreci ati on&amorti za ti on
Les s :Fi xeda s s etpurcha s es
Les s :Cha nges i nnetworkingca pi ta l
Pl us :Cha nges i ns horttermnotes pa ya bl e
Pl us :Cha nges i ncurrentl ongtermnotes pa ya ble
Pl us :Cha nges i nl ongtermnotes pa ya bl e
Les s :PreferredDivi dends
FreeCashFlowavailabletoEquity(FCFE)
2008
2009
2010
2011
107
20
87
0
87
0
87
66
44
110
0
110
0
110
30
147
0
0
140
0
287
66
0
140
0
0
0
58
0
91
43
134
0
134
0
134
36
169
0
0
105
3
271
91
0
105
3
0
0
78
0
144
46
190
0
190
0
190
168
221
0
0
46
3
270
144
0
46
3
0
0
88
0
148
115
105
KeyEarnings
Enterprise
Value/EBITDA
EnterpriseValue
Enterprise
Value/Revenue
LeveredFree
CashFlow
OperatingCash
Flow
Operating
Margins
FreeCashFlow
toEquity
RMAAnalysisCommonSizeStatement
RMABusinessvs.Industry
CommonSizeStatements,CurrentYear
4YrAverage
Business
2011
Industry
Difference
Variance
Variance
2011
IncomeData:
Netsales
100.00%
100.00%
0.00%
0.00%
0.00%
Grossprofit
100.00%
100.00%
0.00%
0.00%
0.00%
0.30%
Operatingexpenses
78.90%
85.60%
6.70%
7.80%
Operatingprofit
21.10%
14.40%
6.70%
46.50%
1.60%
Allotherexpenses(net)
19.50%
10.40%
9.10%
87.50%
128.70%
1.60%
4.00%
2.40%
60.00% 22989.90%
Cash&equivalents
2.10%
7.80%
5.70%
73.10%
Tradereceivables(net)
0.00%
1.80%
1.80%
100.00%
98.70%
Inventory
0.00%
0.50%
0.50%
100.00%
100.00%
ProfitBeforeTax
Assets:
73.70%
Allothercurrent
0.00%
1.50%
1.50%
100.00%
100.00%
TotalCurrentAssets
2.10%
11.60%
9.50%
81.90%
1686.90%
Fixedassets(net)
97.90%
78.00%
19.90%
25.50%
25.50%
Intangibles(net)
0.00%
3.60%
3.60%
100.00%
100.00%
Allothernoncurrent
TotalNoncurrentAssets
TotalAssets
0.00%
6.80%
6.80%
100.00%
100.00%
97.90%
88.40%
9.50%
10.70%
10977.70%
100.00%
100.00%
Liabilities&NetWorth:
Notespayableshortterm
6.60%
2.10%
4.50%
214.30%
201.70%
CurrentmaturityoflongtermDebt
0.00%
4.50%
4.50%
100.00%
100.00%
Tradepayables
0.00%
1.90%
1.90%
100.00%
100.00%
Incometaxespayable
0.00%
0.00%
0.00%
0.00%
0.00%
Allothercurrentliabilities
0.00%
8.80%
8.80%
100.00%
100.00%
TotalCurrentLiabilities
6.60%
17.30%
10.70%
61.80%
3562.70%
Longtermdebt
78.60%
71.10%
7.50%
10.50%
11.60%
Deferredtaxes
0.00%
0.00%
0.00%
0.00%
0.00%
Allothernoncurrentliabilities
0.00%
5.70%
5.70%
100.00%
100.00%
14.80%
5.90%
8.90%
150.80%
142.30%
100.00%
100.00%
Networth
TotalLiabilities&NetWorth
CommonSizeStatementor
VerticalFinancialAnalysis
RMA(RiskManagement
Association)Statement
Studies
CompareIndustryverses
thesubjectloan
Difference
Variance
4yearaveragevariance
RMARatioComparison
RMABusinessvs.IndustryRatios,
CurrentYear
4YrAverage
Business
Industry
Difference
Variance
Variance
2011
2011
Currentratio
0.3
0.6
0.3
46.20%
45.50%
Quickratio
0.3
0.5
0.2
35.40%
34.60%
Accountsreceivableturnover
0.00%
0.00%
Inventoryturnover
0.00%
0.00%
Accountspayableturnover
0.00%
0.00%
7.7
24.8
17.1
69.00%
73.20%
Timesinterestearned
0.00%
0.00%
Currentportionoflongtermdebtcoverageratio
0.00%
0.00%
FixedassetstoTangiblenetworth
6.6
14.3
7.7
53.80%
51.90%
TotaldebttoTangiblenetworth
5.8
17
11.2
66.10%
64.60%
0.4
13.00%
0.3
223.10%
59.90%
LiquidityRatios:
Workingcapitalturnover
CoverageRatios:
Leverage/CapitalizationRatios:
OperatingRatios:
PercentreturnonTangiblenetworth
PercentreturnonTotalassets
0.1
2.00%
210.00%
42.10%
NetsalestoNetfixedassets
0.4
0.6
0.3
41.70%
51.50%
NetsalestoTotalassets
0.3
0.5
0.2
31.40%
43.00%
PercentDepr.,Amort.toNetsales
9.00%
0.1
100.00%
100.00%
PercentOfficersalariestoNetsales
4.30%
53.50%
54.40%
PeerComparisonReview
FinancialGrowthEvaluation
SustainableGrowthComponents
NetSalesRevenue
NetIncome
TotalAssets
TotalEquity
PreferredDividends
CommonDividends
SustainableGrowthRatios
ProfitMargin(NetIncome/TotalRevenue)a
EarningsRetention(1[TotalDividends]/NI)b
AssetTurnover(TotalRevenue/TotalAssets)c
FinancialLeverage(TotalAssets/TotalEquity)d
MaximumSustainableGrowthinRevenue(a*b*c*d)
HistoricGrowthinTotalRevenue
DifferencefromMaximum
HistoricGrowthinTotalRevenue(RollingAverage)
2008
2009
2010
2011
606
107
3,345
519
0
0
1,015
66
3,205
437
0
0
932
91
3,103
410
0
0
1,046
144
3,054
452
0
0
17.66%
100.00%
18.12%
644.51%
20.62%
6.50%
100.00%
31.67%
733.41%
15.10%
67.49%
52.39%
9.76%
100.00%
30.04%
756.83%
22.20%
8.18%
30.37%
13.77%
100.00%
34.25%
675.66%
31.86%
12.23%
19.63%
67.49%
29.66%
23.85%
SustainableGrowthComponent
NetIncome
AssetTurnOver
HistoricalGrowth
TotalAssets
FinancialLeverage
HistoricalGrowthinTotalRevenue
DuPontAnalysis
DupontAnalysis
NetSalesRevenue
Dividedby:TotalAssets
AssetTurnoverRatioa
NetIncome
Dividedby:NetSales
ReturnonSalesRatiob
DuPontReturnonAssets(axb)
2008
834
9,449
0.09
2009
1,683
8,467
0.2
2010
1,968
7,588
0.26
2011
1,943
6,717
0.29
447
812
398
498
834
1,683
1,968
1,943
53.60% 48.25% 20.22% 25.63%
4.73% 9.59% 5.25% 7.41%
DupontAnalysis
0.00%
10000
10.00%
8000
20.00%
6000
30.00%
4000
40.00%
2000
50.00%
TotalAssets
Dividedby:TotalEquity
FinancialLeverageRatioc
9,449
0
0
8,467
0
0
7,588
0
0
6,717
0
0
DuPontReturnonEquity(axbxc)
0.00%
0.00%
0.00%
0.00%
2008
2009
0.00%
0.00%
0.00%
DuPontAnalysis
2011
2000
DuPontAssetTurnover
FinancialLeverage
DuPontReturnonEquity
AssetTurnOverRatio
60.00%
70.00%
NetSale
TotalAssets
NetIncome
ReturnonSalesRatio
DuPontReturnonAssets
DuPontReturnonEquity(RollingAverage)
2010
ReturnonAssets
ReturnonAssets:
NetIncomeAfterTaxtoTotalAssets
NetOperatingIncometoTotalAssets
EBITDAtoTotalAssets
EBITtoTotalAssets
FCFEtoTotalAssets
FCFTICtoTotalAssets
ReturnonEquity:
NetIncomeAfterTaxtoTotalEquity
NetOperatingIncometoTotalEquity
EBITDAtoTotalEquity
EBITtoTotalEquity
EBTtoTotalEquity
FCFEtoTotalEquity
FCFTICtoTotalEquity
ReturnonTotalInvestedCapital(TIC):
EBITtoTotalInvestedCapital(TIC)
EBITDAtoTotalInvestedCapital(TIC)
FCFTICtoTotalInvestedCapital(TIC)
2008
2009
2010
2011
3.20%
0.87%
2.60%
2.60%
2.06%
4.59%
3.43%
3.43%
4.62%
8.95%
2.93%
5.45%
4.32%
4.32%
3.71%
8.73%
4.72%
7.24%
6.22%
6.22%
3.44%
8.84%
15.10%
33.64%
25.17%
25.17%
25.17%
33.87%
65.68%
22.20%
41.22%
32.68%
32.68%
32.68%
28.05%
66.10%
31.86%
48.89%
42.04%
42.04%
42.04%
23.23%
59.73%
3.43%
3.43%
8.95%
4.32%
4.32%
8.74%
6.22%
6.22%
8.84%
ReturnonAssets
ReturnonEquity
ReturnonTotalInvestedCapital
RatioAnalysisYeartoYear
TypeofStatement
#ofMonths:
DateofStatement:
TaxReturn
TaxReturn
12
12
12
12
LIQUIDITYRATIOS:
WorkingCapital
Quick
Current
Sales/NetWorkingCapital
380.0
1.02
1.22
21.85
172.0
0.49
0.85
43.34
357.0
0.60
0.70
21.64
977.0
0.18
0.18
7.71
1,311.0
2.10
2.10
6.33
19.85
12.45
3.90
2.47
2.96
1.68
3.14
1.58
3.83
1.74
15
28
66
1.00
24
24
73
0.92
24
40
117
0.79
#DIV/0!
#DIV/0!
116
0.63
#DIV/0!
#DIV/0!
116
0.78
82.14
65.20
16.94
7.50
9.44
6.48
2.96
0.98
78.13
73.32
4.82
7.14
2.32
7.12
9.44
10.06
6.93
56.06
85.45
71.82
13.63
6.89
6.74
6.78
0.04
0.12
3.32
7.86
85.33
69.25
16.09
7.07
9.02
6.96
2.06
1.97
6.88
12.46
86.71
60.27
26.43
6.41
20.03
6.31
13.72
13.63
24.15
52.52
LEVERAGERATIOS:
TotalLiabilities/TangibleNetworth
NetFixedAssets/TangibleNetWorth
RatioAnalysis
ProfitabilityAnalysis
GrowthRatio
CoverageRatio
CashPosition
ACTIVITYRATIOS:
ReceivablesinDays
InventoryinDays
PayablesinDays
TotalAssets/NetSales
PROFITABILITYRATIOS:
GrossMargin%
SG&A%
Cushion(GrossMarginSG&A)%
Depreciation%
OperatingProfitMargin%
InterestExpense%
OperatingExpense%
NetMargin%
ReturnonAverageAssets%
ReturnonAverageEquity%
GROWTHRATIOS:
10.24
825.93
17.00
6.51
576.10
NetSalesGrowth
NetIncomeGrowth
TotalAssetsGrowth
TotalLiabilitiesGrowth
NetWorthGrowth
3.64
98.80
11.64
0.74
30.87
2.55
1744.44
21.47
1.30
7.06
10.31
664.86
35.72
3.31
20.80
ProfitabilityAnalysis
100.00
80.00
80.00
60.00
40.00
60.00
20.00
40.00
0.00
20.00
20.00
0.00
40.00
1/1/2008
1/1/2009
1/1/2010
1/1/2011
1/1/2012
20.00
60.00
GrossMargin%
InterestExpense%
OperatingExpense%
NetMargin%
ReturnonAverageAssets%
TotalLiabilities/TangibleNetworth
ReturnonAverageEquity%
NetFixedAssets/TangibleNetWorth
COVERAGERATIOS:
InterestCoverage(EBIT/Interest)
Profit+Dep/CurLongtermMat.
EffectsAfterNewFinancing
2.46
1.69
2.29
0.67
0.01
1.07
1.99
1.20
2.17
2.30
1.47
2.42
4.17
3.07
4.00
0.1
1.4
0.0
0.3
2.1
CASHPOSITION:
NetIncome+Depreciation
TotalConsolidatedFinancialData
SourceDataforRevenue&RatioCalculations:
NetSalesrevenue
CostofSales
GrossMargin
OfficerSalary
NonOfficerWages
TotalWages
Research&Development
TotalGeneral&AdministrativeExpense
TotalOperatingExp.(COGS+Selling+G&A)
NetOperatingIncome
EBITDA
EBIT
EBT
NetIncomeAfterTax
NetCashFlow
CashfromOperations
FreeCashFlowavailabletoEquity(FCFE)
FreeCashFlowavailabletoTIC(FCFTIC)
2008
834
0
834
2009
1,683
0
1,683
2010
1,968
0
1,968
2011
1,943
0
1,943
60
106
166
60
237
297
60
250
310
60
229
289
0
1,249
1,249
415
163
415
415
447
0
2,366
2,366
683
299
683
683
812
822
170
822
951
0
2,237
2,237
269
601
269
269
398
1,140
472
1,140
1,269
0
2,310
2,310
367
504
367
367
498
1,032
373
1,032
1,163
FreeCashFlowtoEquity
FreeCashFlowtoTotalInvestedCapital
EBITDA
EBIT
EBT
NetIncomeAfterTax
NetCashFlow
TotalInterestBearingDebt
CashFlowConsolidated
1400
315
1200
310
305
1000
300
800
295
600
Cash&Equivalents
AccountsReceivable
Inventory
WorkingCapital
NetFixedAssets
NetIntangibleAssets
TotalAssets
TotalInterestBearingDebt
TotalEquity
TotalInvestedCapital(TIC)
450
30
5
900
5,974
0
9,449
8,017
0
8,046
450
30
5
900
4,992
0
8,467
8,017
0
8,046
450
30
5
900
4,113
0
7,588
8,017
0
8,046
450
30
5
900
3,242
0
6,717
8,017
0
8,046
290
400
285
200
280
275
2009
2010
2011
NetCashFlow
CashFromOperations
FreeCashFlowtoEquity
FreeCashFlowtoTIC
TotalWages
FINANCIALMODELINGFORSBA
Section
VALUATION
PresentValue
LTVFinancialModel
$6,000
$4,000
$2,000
$
$(2,000)
10
11
$(4,000)
$(6,000)
TotalPropertyPresentValue
TotalProperty
Mortgage
$6,000
Equity
1.000000
$5,000
0.800000
$4,000
0.600000
$3,000
0.400000
$2,000
0.200000
$1,000
$
0.000000
NOIBeforeDebt
DiscountCashFlow
10
PVFactor
EquityofPresentValue
$2,500
1.000000
$2,000
0.800000
$1,500
0.600000
$1,000
0.400000
$500
0.200000
$
$(500)
NOIEquity
DiscountCashFlow
9
PVFactor
10
0.000000
FinancialModel
LTVChangefor10years
EquityinPresentValue
TotalPropertyPresentValue
CapitalAdjustedEarningValue
Year Earnings
Weight AdjustedValue AdjustedValue/TotalWeight IndicatedValue
1
$412,000.00
1
$412,000.00
2
$465,000.00
2
$930,000.00
3
$470,000.00
3 $1,410,000.00
4
$523,000.00
4 $2,092,000.00
5
$616,000.00
5 $3,080,000.00
Total
$2,486,000.00
15 $7,924,000.00
$528,266.67 $2,641,333.33
CapitalizedAdjustedEarningsValue
$4,000,000.00
$3,500,000.00
$3,000,000.00
$2,500,000.00
$2,000,000.00
$1,500,000.00
$1,000,000.00
$500,000.00
$0.00
$500,000.00
Earnings
3
Years
AdjustedValue
IndicatedValue
CharacteristicofCAEValue
Basedonamajor
operationalfactorearning
power
Fiveyear'searningsshould
beconsidered
Earningsshouldbeadjusted
forextraordinaryandnon
recurringitems
Theadjustedearningscan
beaveragedorweighted
Canusetheprevailingrate
ofreturnforcomparable
companiesoran
appropriatediscountrate
ValueofBusiness=Amount
ofAnnualEarnings/
CapitalizationRate
DiscountFutureEarnings
Year
1
2
3
4
5
6
7
8
9
10
Averageearnings
$58,000.00
$60,900.00
$63,945.00
$67,142.25
$70,499.36
$74,024.33
$77,725.55
$81,611.82
$85,692.42
$89,977.04
Growthrate
ProjectedGrowth
105.00%
$60,900.00
105.00%
$63,945.00
105.00%
$67,142.25
105.00%
$70,499.36
105.00%
$74,024.33
105.00%
$77,725.55
105.00%
$81,611.82
105.00%
$85,692.42
105.00%
$89,977.04
105.00%
$94,475.89
IndicatedValue
Factor
0.8333
0.6944
0.5787
0.4822
0.4018
0.3349
0.279
0.2325
0.1938
0.1616
NetPresentValue
$50,747.97
$44,403.41
$38,855.22
$33,994.79
$29,742.98
$26,030.29
$22,769.70
$19,923.49
$17,437.55
$15,267.30
$299,172.69
DiscountFutureEarnings
$100,000.00
0.9
$90,000.00
0.8
$80,000.00
0.7
$70,000.00
0.6
$60,000.00
0.5
$50,000.00
0.4
$40,000.00
0.3
$30,000.00
$20,000.00
0.2
$10,000.00
0.1
0
$0.00
AverageEaarnings
ProjectedGrowth
NetPresentValue
10
Factors
PresentValue
HistoricalPatternsof
Growth
TheDiscountRate
GrowthRate
Factors
ProjectedGrowth
GrossMultiplierValuation
35
GrossMultiplier
30
30
25
23
20
15
12
9
7
VideoTapeRentalKorean
2
Teriyaki
RestaurantFull
2
RestaurantFastFood
2
Motel&Hotel
Luggage&Gift
Over$30Msales
Under$30Mmonthlysales
JuiceBar
LiquorStore
3
IceCream&YogurtStore
HealthFood&VitaminStore
Over$200M
Under$100M
Over$100M
CourmentCoffeeShop
ShoeStore
7 7
3 2.5
2
GroceryStore(Market)
Florist
3
GasStation
Deli
DrugStore
Over$30Mmonthlysales
Under$30Mmonthlysales
ConvenienceFoodMart
ConvenientStore(Beer&Wine)
CarWash
CoinLaundry
Nursery,Lawn&GardenSupply
Meat&FishMarket
7 7
Candy,Nut&ConfectioneryStore
10
DryCleaner(plant)
5
0
12
10
VideoTapeRentalAmerican
10
Bakerry
Under$30Mmonthlysales4to7plusinven.
Over$30Msales
4to7plusinven.
Luggage&Gift
2to3
Meat&FishMarket
1to2
Motel&Hotel
3to6timesannualsales
Nursery,Lawn&GardenSupply2timesplusinventory
RestaurantFull
10to12
RestaurantFastFood
5to7
ShoeStore
2timesplusinventory
Teriyaki
8to10
VideoTapeRentalAmerican 5to7
VideoTapeRentalKorean
8to9
GrossMultiplierValuation
Method
GrossMultiplier
BookStore
GROSSMultiplier
AutoRepair
3to4
Bakerry
5to6
BookStore
2to3plusinventory
Candy,Nut&ConfectionerySto5to7
CarWash
20to30
CoinLaundry
20to23
ConvenienceFoodMart
4to5
ConvenientStore(Beer&Wine)
Under$30Mmonthlysal 4to7plusinven.
Over$30Mmonthlysale 4to7plusinven.
Deli
6to10
DrugStore
4times
DryCleaner(plant)
10to12
Florist
3times
GasStation
3to5
5to7
CourmentCoffeeShop
GroceryStore(Market)
Under$100M
3timeinventory
Over$100M
2to2.5timesplusinventory
Over$200M
2timesplusinventory
HealthFood&VitaminStore 5to6
IceCream&YogurtStore
7times
JuiceBar
6to8
LiquorStore
$30 (LatestT/R)
7
$2,118
AutoRepair
II.GROSSMULTIPLIER
MonthlyGrossSales
GrossMultiplier
ValueoftheBusiness
FINANCIALMODELINGFORSBA
Section
STRESSTEST
StaticStressTestIncomeStatement
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
INCOMESTATEMENT:
Menu
StressTestonRevenue
100.00%
Menu
StressTestonTotalExpense
100.00%
Menu
StressTestonRevenue
100.00%
TaxReturn
12
12/31/2008
$
NetSales
CostofSales
GrossProfit
8,304.0
1,483.0
6,821.0
7,454.0
1,630.0
5,824.0
7,725.0
1,124.0
6,601.0
7,528.0
1,104.0
6,424.0
8,304.0
1,104.0
7,200.0
OfficerCompensation
Wages
Rent
Depreciation
Interest
OtherOperatingExpenses
TotalExpenses
0.0
2,780.0
0.0
623.0
538.0
2,096.0
6,037.0
0.0
2,998.0
0.0
532.0
531.0
1,936.0
5,997.0
0.0
1,981.0
0.0
532.0
524.0
3,043.0
6,080.0
0.0
2,009.0
0.0
532.0
524.0
2,680.0
5,745.0
0.0
1,981.0
0.0
532.0
524.0
2,500.0
5,537.0
0.0
349.0
435.0
516.0
81.0
0.0
352.0
525.0
225.0
750.0
0.0
306.0
215.0
224.0
9.0
0.0
306.0
373.0
225.0
148.0
0.0
306.0
1,357.0
225.0
1,132.0
OtherIncome
ManagementFee5%
Income(Loss)BeforeTaxes
IncomeTax
NetIncome(Loss)
CharacteristicsofStaticStressTest
IncreaseMortgageRate
IncreaseOperatingExpense
DecreasingNetIncome
DecreasingNetProfit
StressTestIncomeStatement
8,000.0
2.50
6,000.0
2.00
1.50
4,000.0
1.00
2,000.0
0.50
DividendsPaid
0.0
OperationalCash
Depreciation/Amort.
+InterestExpense
+RentalExpense
+Other:Owner'sDraw
ManagementFee5%
=AvailableCash
ExistingDebtService
InterestonLine
PrincipalonLine
NewDebtService
Other:
=Surplus
CoverageRatio
435.0
623.0
538.0
0.0
0.0
349.0
1,945.0
624.0
0.0
0.0
0.0
0.0
1,321.0
3.12
525.0
532.0
531.0
0.0
0.0
352.0
890.0
624.0
0.0
0.0
0.0
0.0
266.0
1.43
215.0
532.0
524.0
0.0
0.0
306.0
1,577.0
624.0
0.0
0.0
0.0
0.0
953.0
2.53
373.0
532.0
524.0
0.0
0.0
306.0
1,735.0
624.0
0.0
0.0
0.0
0.0
1,111.0
2.78
1,357.0
532.0
524.0
0.0
0.0
306.0
2,719.0
624.0
0.0
0.0
0.0
0.0
2,095.0
4.36
1/1/2008
1/1/2009
1/1/2010
1/1/2011
1/1/2012
2,000.0
0.00
0.50
4,000.0
1.00
NetSales
OperationalCash
TotalCashforDebtService
DebtService
OperationalIncomeafterDebtService
DebtServiceCoverage
StaticStressTestBalanceSheet
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
ASSETS
Cash&Securities
Receivables
Inventory
NotesReceivable
Prepaids
Other
Menu
StressTestonCash&Securities
85.00%
Menu
StressTestonNetFixedAssets
90.00%
Menu
StressTestonCurrentLiabilities
115.00%
Menu
StressTestonLTLiabilities
TaxReturn
12
12/31/2008
StaticStressTestBalanceSheet
Example
115.00%
TaxReturn TaxReturn ernallyPrepar Projection
12
12
12
12
12/31/2009 12/31/2010 12/31/2011 12/31/2012
1,400.0
341.0
114.0
0.0
0.0
224.0
83.0
498.0
107.0
0.0
0.0
316.0
CurrentAssets
1,767.2
853.4
Land
Buildings
Machinery&Equipment
Furniture&Fixtures
Autos&Trucks
OtherFixedAssets
LessDepreciation
NetFixedAssets
IntangibleAssets(net)
Other
500.0
7,900.0
0.0
0.0
0.0
0.0
2,202.0
5,578.2
0.0
0.0
500.0
8,056.0
0.0
0.0
0.0
0.0
2,690.0
5,279.4
0.0
0.0
LongTermAssets
5,578.2
5,279.4
TOTALASSETS
7,345.4
6,132.8
625.0
270.0
516.0
0.0
0.0
0.0
288.0
625.0
327.0
224.0
0.0
0.0
0.0
0.0
LIABILITIES
NotesPayable
AccountsPayable
Taxes
PrivateLender(curr)
SBA(curr)
Accruals
Other
$
212.0
516.0
123.0
0.0
0.0
0.0
$
212.0
0.0
0.0
0.0
0.0
0.0
2500.0
0.0
0.0
0.0
0.0
0.0
723.4
180.2
2,125.0
500.0
7,686.0
0.0
0.0
0.0
0.0
2,967.0
4,697.1
0.0
0.0
500.0
7,342.0
0.0
0.0
0.0
0.0
3,287.0
4,099.5
0.0
0.0
500.0
7124.0
0.0
0.0
0.0
0.0
3654.0
3,573.0
0.0
0.0
4,697.1
4,099.5
3,573.0
5,420.5
4,279.7
5,698.0
625.0
359.0
224.0
0.0
0.0
0.0
0.0
615.0
350.0
224.0
0.0
0.0
0.0
0.0
615.0
350.0
224.0
0.0
0.0
0.0
0.0
ReducingCurrentAssets
ReducingLongTermAssets
IncreasingCurrentLiabilities
IncreasingLongTermLiabilities
ChangesinCapital
ChangesinEquity
ChangesinPaidInCapital
StressTestBalanceSheet
10,000.0
1,000.0
9,000.0
500.0
8,000.0
0.0
7,000.0
500.0
CurrentLiabilities
1,953.9
1,352.4
1,389.2
1,367.4
1,367.4
6,000.0
LongtermDebt
PrivateLender(LT)
SBA(LT)
SubordinateOfficer
LoansfromStockholders
Other
8,185.0
0.0
0.0
0.0
0.0
0.0
8,065.0
0.0
0.0
0.0
0.0
0.0
7,965.0
0.0
0.0
0.0
0.0
0.0
7,865.0
0.0
0.0
0.0
0.0
0.0
7565.0
0.0
0.0
0.0
0.0
0.0
5,000.0
LongTermLiabilities
9,412.8
9,274.8
9,159.8
9,044.8
8,699.8
2,000.0
2,500.0
1,000.0
3,000.0
TOTALLIABILITIES
11,366.6
10,627.2
10,549.0
10,412.1
10,067.1
NETWORTH
PartnersCapital
CapitalSurplus
RetainedEarnings
(TreasuryStock)
109.0
299.0
90.0
0.0
1,284.0
1,354.0
267.0
0.0
650.0
1,723.0
730.0
0.0
350.0
2,534.0
0.0
0.0
250.0
2534.0
0.0
0.0
TOTALNETWORTH
498.0
2,371.0
3,103.0
2,884.0
2,284.0
11,864.6
8,256.2
7,446.0
7,528.1
7,783.1
TOTALLIAB&NETWORTH
1,000.0
1,500.0
4,000.0
2,000.0
3,000.0
3,500.0
0.0
1/1/2008
1/1/2009
1/1/2010
1/1/2011
1/1/2012
Current
Assets
LongTerm
Assets
Current
Liabilities
LongTerm
Liabilities
TOTALNET
WORTH
GlobalStressTestIncomeStatement
Menu
StressTestonRevenue
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
INCOMESTATEMENT:
NetSales
CostofSales
GrossProfit
OfficerCompensation
Wages
Rent
Depreciation
Interest
OtherOperatingExpenses
TotalExpenses
OtherIncome
OtherExpenses
Income(Loss)BeforeTaxes
IncomeTax
NetIncome(Loss)
DividendsPaid
OperationalCash
Depreciation/Amort.
+InterestExpense
+RentalExpense
+Other:Owner'sDraw
+Other:
=AvailableCash
ExistingDebtService
InterestonLine
PrincipalonLine
NewDebtService
Other:OwnersDraw1.5Facto
=Surplus
CoverageRatio
Menu
StressTestonTotalExpense
115.00%
Menu
StressTestonDebtService
120.00%
TaxReturn
TaxReturn
12
12/31/2008
95.00%
TaxReturn
12
12/31/2009
$
12
12/31/2010
InternallyPrepared
12
12/31/2011
$
12,725.3
4,495.0
8,230.3
14,004.9
5,790.0
8,214.9
13,584.1
5,549.0
8,035.1
13,948.9
5,976.0
7,972.9
122.0
3,933.0
963.0
534.0
353.0
1,384.0
8,382.4
320.0
3,892.0
903.0
483.0
355.0
1,595.0
8,680.2
789.0
3,290.0
873.0
409.0
278.0
1,594.0
8,318.0
647.0
3,327.0
749.0
387.0
244.0
1,616.0
8,015.5
0.0
58.0
210.1
0.0
210.1
38.0
215.0
642.3
0.0
642.3
18.0
235.0
499.9
0.0
499.9
0.0
235.0
277.7
0.0
277.7
StaticStressTest
ReduceRevenueby%
IncreaseTotalExpenseby%
IncreaseMortgagePaymentby%
ChangesinDSCR
ChangesinSurplusIncome
StressTestIncomeStatement
10,000.0
3.00
2.00
5,000.0
210.1
534.0
353.0
144.0
102.0
506.0
1,428.9
524.4
0.0
0.0
0.0
0.0
904.5
2.72
642.3
483.0
355.0
355.0
157.0
102.0
809.7
524.4
0.0
0.0
0.0
0.0
285.3
1.54
499.9
409.0
278.0
144.0
129.0
867.0
1,327.1
582.0
0.0
0.0
0.0
0.0
745.1
2.28
277.7
387.0
244.0
0.0
129.0
823.0
1,305.4
582.0
0.0
0.0
0.0
0.0
723.3
2.24
1.00
0.0
1/1/2008
1/1/2009
1/1/2010
1/1/2011
5,000.0
1/1/2012
0.00
1.00
NetSales
OperationalCash
TotalCashforDebtService
DebtService
OperationalIncomeafterDebtService
DebtServiceCoverage
GlobalStressTestBalanceSheet
TypeofStatement
#ofMonths:
DateofStatement:
(InThousands)
ASSETS
Cash&Securities
Receivables
Inventory
NotesReceivable
Prepaids
Other
CurrentAssets
Land
Buildings
Machinery&Equipment
Furniture&Fixtures
Autos&Trucks
OtherFixedAssets
LessDepreciation
NetFixedAssets
IntangibleAssets(net)
Other
LongTermAssets
TOTALASSETS
LIABILITIES
NotesPayable
AccountsPayable
Taxes
PrivateLender(curr)
SBA(curr)
Accruals
Other
CurrentLiabilities
LongtermDebt
PrivateLender(LT)
SBA(LT)
SubordinateOfficer
LoansfromStockholders
Other
LongTermLiabilities
TOTALLIABILITIES
NETWORTH
CommonStock
CapitalSurplus
RetainedEarnings
(TreasuryStock)
TOTALNETWORTH
TOTALLIAB&NETWORTH
Menu
StressTestonCash&Securities
85.00%
Menu
StressTestonNetFixedAssets
95.00%
Menu
StressTestonCurrentLiabilities
125.00%
Menu
StressTestonLTLiabilities
125.00%
TaxReturn
TaxReturn
12
12/31/2008
TaxReturn
12
12/31/2009
$
12
12/31/2010
$
1,799.5
610.0
419.0
0.0
0.0
0.0
2,828.5
1,375.0
6,402.0
0.0
350.0
11.0
438.0
1,836.0
6,831.8
575.0
95.0
6,751.6
9,580.1
1,215.0
984.0
443.0
0.0
0.0
0.0
2,642.0
1,375.0
6,507.0
0.0
418.0
11.0
475.0
2,326.0
6,576.3
604.0
99.0
6,551.4
9,193.4
2,139.0
558.0
305.0
0.0
0.0
79.0
3,081.0
1,375.0
6,737.0
0.0
455.0
11.0
495.0
2,681.0
6,526.1
628.0
69.0
6,500.7
9,581.8
838.0
257.0
345.0
30.0
0.0
0.0
84.0
1,942.5
4,566.0
0.0
0.0
0.0
576.0
40.0
6,477.5
8,420.0
857.0
446.0
403.0
0.0
0.0
0.0
65.0
2,213.8
4,303.0
0.0
0.0
0.0
582.0
0.0
6,106.3
8,320.0
834.0
555.0
280.0
0.0
0.0
0.0
303.0
2,465.0
4,733.0
0.0
0.0
0.0
616.0
0.0
6,686.3
9,151.3
2,607.0
1,077.0
1,023.0
526.0
3,079.0
11,499.0
2,077.0
1,053.0
763.0
861.0
2,648.0
10,968.0
2,015.0
662.0
585.0
580.0
2,518.0
11,669.3
GlobalStaticStressTestonBalanceSheet
Examples
ReducingCurrentAssets
ReducingLongTermAssets
IncreasingCurrentLiabilities
IncreasingLongTermLiabilities
ChangesinCapital
ChangesinEquity
ChangesinPaidInCapital
DynamicStressTestonNetIncome
NormalRandomDistributionfortheBellCurvetodeterminetherangeofincomefromnon
historicalrangetofindthe95%confidencelevelforpredictingdefaultratepossibilities
MinandMaxistoInfinitywithMeansattheHistoricalNetSales
DynamicStressTestonNetIncomeSimulation
SummaryStatisticsforNetIncome(Loss)/
VaR (ValueatRisk)
DynamicStressTest
Exampleforthe
financialmodel
Finding90%
confidencelevelfor
netincome
probabilitieswithnon
historicaldistribution
RegressionandRankInformationforNetIn
Statistics
Minimum
236.8
Percentile
5% 91.7
Maximum
235.4
Mean
9.0
StdDev
61.5
Variance
3777.120076
25% 32.8
Skewness
0.00692026
30% 23.3
Kurtosis
2.960802516
35% 15.1
NetSales/Tax0.000 0.006389201
Median
9.5
40% 6.8
NetSales/Inte0.000 0.00615364
10% 70.2
Rank
1
Name
Regr Corr
NetSales/Tax0.986 0.985
15% 55.0
20% 42.9
NetSales/Tax0.000 0.007353246
NetSales/Tax0.000 0.00644023
Mode
14.7
45% 1.1
SimulationSummaryInformation
LeftX
91.7
50% 9.5
WorkbookName
Hotel
LeftP
5%
55% 17.0
NumberofSimulations
RightX
109.8
60% 25.2
NumberofIterations
10000
RightP
95%
65% 32.9
201.5
70% 41.3
11
DiffX
10
NumberofInputs
11
NumberofOutputs
SamplingType
DiffP
90%
75% 50.7
#Errors
80% 61.1
LatinHypercube
FilterMin
Off
85% 72.2
SimulationStartTime
4/29/1218:43:26
FilterMax
Off
90% 87.7
SimulationDuration
00:00:36
#Filtered
95% 109.8
Random#Generator
MersenneTwister
RandomSeed
623328357
RandomDistributiononDynamicStressTest
Name
Description
Cell
Minimum
Maximum
Mean
Std Deviation
Variance
Skewness
Kurtosis
Errors
Mode
5% Perc
10% Perc
15% Perc
20% Perc
25% Perc
30% Perc
35% Perc
40% Perc
45% Perc
50% Perc
55% Perc
60% Perc
65% Perc
70% Perc
75% Perc
80% Perc
85% Perc
Net Income (Loss) Net Income (Loss) Net Income (Loss) Net Income (Loss) Net Income (Loss) Net Sales / Tax Re Net Sales / Tax Re Net Sales / Tax Re Net Sales / Tax Re Net Sales / InterimTotal Expenses / TTotal Expenses / TTotal Expenses / TTotal Expenses / TTotal Expenses / InNet Income (Loss)
Output
Output
Output
Output
Output
RiskNormal(606,60RiskNormal(1015,1RiskNormal(932,93RiskNormal(1046,1RiskNormal(289,28RiskNormal(0,10) RiskNormal(0,10) RiskNormal(0,10) RiskNormal(0,10) RiskNormal(216,21RiskNormal(G14,10
IS Risk!E42
IS Risk!G42
IS Risk!I42
IS Risk!K42
IS Risk!M42
IS Risk!E14
IS Risk!G14
IS Risk!I14
IS Risk!K14
IS Risk!M14
IS Risk!E36
IS Risk!G36
IS Risk!I36
IS Risk!K36
IS Risk!M36
IS Risk!M42
-236.8
-302.6
-231.0
-231.1
705.8
379.557
597
580.297
632
168.6
-43.3
-38.1
-37.8
-38.5
131.6
601.1
235.4
486.3
473.4
568.7
1,474.1
837.9567
1,393
1279.927
1,435
399.5
40.0
38.3
38.2
39.1
300.9
1,399.3
9.0
103.0
126.0
175.0
1,072.0
606.0002
1,015
931.9985
1,046
289.0
0.0
0.0
0.0
0.0
216.0
1,015.0
61.5
102.0
93.8
105.0
107.3
60.59236
102
93.19068
105
28.9
10.0
10.0
10.0
10.0
21.6
102.0
3777.12
10413.63
8793.131
11031.09
11519.25
3671.434
10302.87
8684.503
10942.09
835.2991
100.0386
99.98239
99.98991
100.0002
466.5843
10396.92
-0.006920262 0.001444166
0.005323659
-0.005140138 0.02513833
0.00024413
-0.001981249 -0.000605602 -0.000977329 -0.001868625 -0.00133437
-0.000209147 -0.000182751 0.000442673
-0.000574686 0.003335343
2.960803
2.998133
2.990278
2.98906
2.966446
2.991784
2.999088
2.992413
2.998844
3.000496
3.008265
2.993162
2.99462
2.996958
2.998406
3.003831
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14.7
85.7
122.6
202.5
1,069.8
605.24
1,016
928.4946
1,050
289.4
0.1
-0.4
0.4
0.1
215.2
1,029.3
-91.7
-64.6
-28.0
2.4
896.6
506.3094
848
778.634
874
241.4
-16.5
-16.5
-16.5
-16.5
180.5
847.9
-70.2
-27.6
6.7
40.7
934.8
528.3261
885
812.5376
912
252.0
-12.8
-12.8
-12.8
-12.8
188.3
884.5
-55.0
-2.6
28.7
66.5
961.6
543.1758
910
835.3942
938
259.0
-10.4
-10.4
-10.4
-10.4
193.6
909.2
-42.9
17.2
46.5
87.1
981.4
554.989
930
853.5484
958
264.7
-8.4
-8.4
-8.4
-8.4
197.8
929.3
-32.8
34.8
63.0
104.0
999.0
565.1128
947
869.1371
975
269.5
-6.7
-6.7
-6.7
-6.7
201.4
945.7
-23.3
49.9
76.3
119.8
1,015.2
574.2043
962
883.1166
991
273.8
-5.2
-5.2
-5.2
-5.2
204.7
961.7
-15.1
63.7
89.4
134.0
1,030.3
582.6394
976
896.0869
1,006
277.9
-3.9
-3.9
-3.9
-3.9
207.7
975.5
-6.8
76.9
101.9
148.0
1,043.9
590.6418
989
908.3656
1,019
281.7
-2.5
-2.5
-2.5
-2.5
210.5
987.7
1.1
89.5
114.5
161.6
1,057.9
598.3846
1,002
920.2837
1,033
285.4
-1.3
-1.3
-1.3
-1.3
213.3
1,002.1
9.5
102.6
126.3
175.2
1,071.0
605.9914
1,015
931.9926
1,046
289.0
0.0
0.0
0.0
0.0
216.0
1,015.0
17.0
115.2
137.5
188.1
1,084.8
613.6063
1,028
943.705
1,059
292.6
1.3
1.3
1.3
1.3
218.7
1,028.6
25.2
128.3
149.8
201.4
1,099.0
621.3454
1,041
955.5937
1,072
296.3
2.5
2.5
2.5
2.5
221.5
1,040.5
32.9
143.1
162.2
215.7
1,113.1
629.3452
1,054
967.8937
1,086
300.1
3.9
3.9
3.9
3.9
224.3
1,053.9
41.3
156.8
175.5
230.7
1,128.4
637.7754
1,068
980.8478
1,101
304.1
5.2
5.2
5.2
5.2
227.3
1,069.0
50.7
172.2
189.6
246.2
1,145.3
646.8585
1,083
994.8506
1,117
308.5
6.7
6.7
6.7
6.7
230.6
1,084.2
61.1
189.1
204.7
263.7
1,162.7
656.9895
1,100
1010.408
1,134
313.3
8.4
8.4
8.4
8.4
234.2
1,100.4
72.2
208.9
222.3
284.1
1,182.6
668.8029
1,120
1028.587
1,154
318.9
10.4
10.4
10.4
10.4
238.4
1,120.9
RandomDataGenerationforNetIncome,NetExpense,andNOI(Net
OperatingIncome,andhowitaffectstheDSCR
RandomDistributionofIncomeafterDebtService
MeanofIncomeAfterDebtService/2011H15vsInputDistribution
Percentile
IncomeAfterDebtService/2011
1200
1000
800
IncomeforDebtService(NOI)
/2008E9
600
IncomeforDebtService(NOI)
/2009F9
400
IncomeforDebtService(NOI)
/2010G9
200
IncomeforDebtService(NOI)
/2011H9
120%
Percentile
100%
80%
60%
40%
20%
0%
MeanofIncomeAfterDebtService/2011H15vsPercentageChangeof
Inputs
1000
800
IncomeforDebtService(NOI)/
2008E9
600
IncomeforDebtService(NOI)/
2009F9
400
IncomeforDebtService(NOI)/
2010G9
200
IncomeforDebtService(NOI)/
2011H9
ChangeFromBaseValue(%)
30%
20%
10%
0%
10%
20%
0
30%
IncomeAfterDebtService/2011
1200
ScenarioandSensitivityDistribution
SensitivityTornado
IncomeforDebtService(NOI)/2011H9
IncomeforDebtService(NOI)/2008E9
IncomeforDebtService(NOI)/2009F9
MeanofIncomeAfterDebtService/2011
1200
1100
1000
900
800
700
600
500
IncomeforDebtService(NOI)/2010G9
MonteCarloSimulationBellCurveforNormalDistribution
Mean(Average)
StandardError
Median
Mode
StandardDeviation
SampleVariance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
95% ConfidenceLevel
4330.4
208.906
4187
#N/A
467.127
1.972662692
3.07190
0.359986
960
3885
4845
21652
5
409.4475004
4,330 mean
467 standarddeviation
Monte CarloSimulation
Median
Average numbersonRandomDistribution
SampleVariance
Howfarthedistributionisspreadout
Minimum
Minimum oftheDistribution
Maximum
MaximumofDistribution
totalarea
shadedarea
1.0000
89.2%
ProbabilityFactor
Integration of Gaussian (normal) Distribution
0.0009
0.0008
0.0007
f(x)
0.0006
0.0005
0.0004
0.0003
0.0002
0.0001
0
1,995
2,462
2,929
3,396
3,863
4,330
4,798
5,265
5,732
6,199
6,666
FINANCIALMODELINGFORSBA
Section
BANKSRISKANDRETURNON
CAPITAL
RiskAdjustedReturnonCapital
Return
totalavailableequity
EaRofbusiness
EaRoftheBank
US$2,000,000
US$100,000,000
US$1,000,000
US$4,000,000
Outputs(Example1)
RAROC
8.00%
Durationoftheloan(yrs)
LoanAmount
Maximumchangeintheyieldspread
rateonabondissuedbythefirm
Oneyearspreadrate
Oneyearfeesrate
LoanRisk(orCapitalRisk)
Oneyearincomeonaloan
3.6
US$100,000,000
1.2%
12.0%
0.2%
0.1%
US$3,857,142.86
US$300,000.0
TheLoan'sRAROC
7.78%
BanksCapitalRiskExample
ReturnonLoan
Durationoftheloan
DurationoftheInterestRisk
MaximumChargeofYield
Spread
RateoftheIssuedCreditorBond
RiskFreeRate
1Yearofinterestincomeonthe
packagesoftheloan
CapitalRisk
RAROC
FINANCIALMODELINGFORSBA
Section
INTERESTRATESWAP
InterestRateSwapandRisktoBanksLoanPortfolio
AandBcanmakeaprofitbythefollowinginterestrateSWAPagreement:
Fixedrate
3.00%
LenderA
LenderB
InterestSwaps
Whatbanksusetohedge
theportfolioofloans
whichhaveinterestrate
risk,collateralrisk,sector
andbusinesscyclerisk
Libor
Euribor+2.00%
Fixedrate 3.00%
OutsideLender
(Bank)
OutsideLender
(Bank)
Comparingthenetinterestflowsshowsusthatbothcompaniescanwininthearrangement
FloatinginterestforLenderA
FixedinterestforLenderB
FinanceMarket
Euribor+1.00%
6.00%
SWAP
Libor
5.00%
InterestRatesfacedbyLenderB
InterestRatesfacedbyLenderA
11.00%
10.00%
10.00%
9.00%
9.00%
8.00%
8.00%
7.00%
7.00%
6.00%
6.00%
5.00%
5.00%
4.00%
4.00%
3.00%
3.00%
FixedInterestRate
FloatingInterestRate
TrueEuribor+2.00%
FixedInterestRate
Exp.Euribor+1.00%
TrueEuribor+1.00%
Expon.(TrueEuribor+1.00%)
SimulationofStochasticInterestRateSwapandCurve
Numericalexamples(pressF9togeneratenewrandomnumbers)
Vasicek
CIR
8.00%
8.00%
Rater 0 att=0
Totalsimulationtime(T)
2
2 year(s)
"Pullback"a
0.07 0.07
Equilibriumb
6.00%
6.00%
Volatilitys
3.00%
10.61%
Dt
0.0067
r b r t t
Simulationofshortterminterestrates
14.0%
12.0%
Vasicek
10.0%
Coxetal.
8.0%
6.0%
Equilibrium
lineb
4.0%
Rateatt=0
2.0%
0.0%
0.5
1.5
Time
2.5
ShortTermInterestSwap
FinancialModel
Determinethe
equilibriumofthe
interestratevolatility
InterestRatemoveson
adaily,monthlyand
yearlyterm
Createadistribution
basedontimeand
historicaldatato
distributetheinterest
ratemovesto
determinetheswap
costtohedge
Vasicek ModelforInterestRateSwapModel
Term structure in Vasicek Model
t
Rate r0 at t=0
8.0%
Vasicek FinancialModel
OneFactorModelforshortterm
InterestRate
2.0
"Pullback" a
0.15
Equilibrium b
6.0%
2.0%
Results:
B in Vasicek Model (Hull)
1.73
0.984227
5.11%
0.857161
0.857161
7.706%
1.728%
6.00%
2.35%
9.65%
5.00%
10.523
Mean of P
6.00%
StDev of P
3.65%
-15%
Vasicek Term Structure of Interest
Vasicek
Zero
Rate
Longterm
equilibri
um rate
r at t=0
10
20
Time to maturity
30
-10%
-5%
0%
-SD
5%
+SD
10%
15%
20%
25%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
0
Spotrate (r)
Mean
40
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
-
Vasicek Discount
Factor
10
Time to maturity
20
30
40
CIRFinancialModelforInterestSwap
TermstructureCIRModel
t(nowyear)
Rater 0att=0
8.0%
Maturitytime(T)
2.0
"Pullback"a
0.15
Equilibriumb
6.0%
InstanteanousStDev.ofshortrate(s)
5.0%
Results:
ginCIRModel(Hull)
BinCIRModel(Hull)
0.16583
1.7254
AinCIRModel(Hull)
0.9838
InfinitelylongRate(Y )
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
0
10
5.70%
CIRDiscountFactor
SolutionwithVBAFunction
CIRZeroRate
CIRvolatitilityofzerorates Y(t,T)
15
20
25
30
35
Timetomaturity
0.856974
40.745515
7.717%
1.220%
Longtermdistributionofr (SteadyStateProbabilityDensityFunction)
r
k=2ab/s
CIRTermStructureofInterest
CIRZeroRate
Longtermequilibriumrate
ratt=0
Infinitelylongrate
6.00%
7.20
17.636
MeanofP
6.00%
StDevofP
2.24%
CIRDiscountFunction
1.0
CIRDiscountFactor
CIRModel:SteadyStateProbabilityDensityFunctionforSpotrater
0.8
6.00%
0.6
8.24%
3.76%
0.4
0.2
Spotrate(r)
Mean
2%
0%
2%
SD
4%
6%
8%
+SD
10%
12%
14%
16%
18%
10
15
Timetomaturity
20
25
30
35
Disclosure
CHCapitalPartnersLLCisholdharmlesstoanyinformationthathasbeenpresented.ItisforeducationalpurposeonlyanditmaynotbecopiedorreplicatedwithoutthepermissionofCHCapitalPartnersLLCamember
ofCordellFinancialGroup.Itisimportanttofullyunderstandthefinancialanalysisthatwassetforthforthemarketplace. Thiswastohelptheindustryunderstandcomplexfinancialmodelstohelpanycreditanalyst.It
isimportanttorealizethatwemakeamajordifferenceinthemarketplacetohelpclientscreatejobsforourfellowAmericans.