CUES Business Lending Edge
CUES Business Lending Edge is a quarterly e-newsletter that covers the latest developments in business services with editorial insight from experienced industry consultants.
CUES Business Lending Edge Summer 2010
No one said that offering member business services would be an easy opportunity for credit unions. Some questions, and advice, to consider.
By Jim Devine, founder, chairman and CEO of Hipereon, Inc.
Effective cash flow analysis is the foundation to successful commercial lending.
By Doug Lacy-Roberts, a financial examiner supervisor for the State of Washington Division of Credit Unions.
Newsletter Puzzle
Given the following business scenario, what is the business' cash position if they have a required annual debt service of $37,000 and what is their debt service coverage ratio?
|
Net Income for period Depreciation Fixed Assets (inc.) Long term debt (inc.) Accounts Receivable (inc.) Inventory (inc.) Accounts Payable (inc.) Accrued Expenses (inc.) Interest expense Withdrawals, dividends |
$65,000 $115,000 $75,000 $70,000 $35,000 $15,000 $3,000 $2,000 $12,000 $25,000 |
(inc. = increase)
Newsletter Puzzle Solution
A short-cut version of cash is:
|
EBITDA WC changes Dividends Non-funded CapEx Total Cash Flow |
$192,000 $(45,000) $(25,000) $ (5,000) $117,000 |
Debt coverage ratio = $117,000/$37,000 = 3.16
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