Credit Analysis and Lending Management - Desklib

Running head: CREDIT ANALYSIS AND LENDING MANAGEMENT
Credit Analysis and Lending Management
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CREDIT ANALYSIS AND LENDING MANAGEMENT
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Executive summary:
Globalization has created number of opportunities for large entities across the globe to expand
their business operations including expansion of infrastructure and other facilities in different
parts of the globe. As a result companies are continuously looking to enter new markets or
expand its facilities in existing markets. However, expansion is very costly for any organization
and requires huge amount of fund. Often the huge requirement of fund becomes a constraint for
an entity and a barrier in its way of expansion. Generally an entity has two broad sources to
generate necessary funds required for expansion; these are internal sources and external sources.
Internal sources include use of retained earnings, i.e. the accumulated profit of the company over
the years. External sources on other hand include issue of share capital or borrowing from banks
and financial institutions. Borrowing is relatively easier option if an entity fulfills the required
criterions needed by the banks and financial institutions for approving loans to companies. A
detailed discussion in this document shows the important aspects that the banks consider before
deciding on the eligibility of an entity to get loan. Both quantitative and qualitative aspects have
been discussed here in relation to the loan requirement of Maxis Communications in this
document.

CREDIT ANALYSIS AND LENDING MANAGEMENT
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Contents
Executive summary:........................................................................................................................1
Introduction:....................................................................................................................................3
About the company:.........................................................................................................................3
Loan requirement and the objective of application for loan:...........................................................4
Evaluation of company’s capacity to borrow the required funds:...................................................4
Quantitative analysis:...................................................................................................................4
The financial performance of the company:................................................................................5
Financial position analysis of the company:................................................................................9
Cash flow position of the company:..........................................................................................15
Qualitative analysis:...................................................................................................................19
Observation:...................................................................................................................................22
Conclusion.....................................................................................................................................23
References:....................................................................................................................................24

CREDIT ANALYSIS AND LENDING MANAGEMENT
3
Introduction:
Maxis Communications is a communication service provider in Malaysia is looking to expand its
business operations by expanding its infrastructure and facilities. As per the initial estimate the
management expects that approximately RM50.0 million funds will be necessary to materialize
the expansion plan of the company. The expansion strategy of the company includes expanding
its infrastructure and facilities in different parts of Malaysia including Kuala Lumpur. A closer
look at its financial statements over the years shall be helpful in assessing its financial
performance and position to assess the capacity of the company to borrow the required amount
of RM50.0 million from banks or any other financial institutions. A bank or a financial
institution would firstly conduct a thorough investigation on the affairs of the company to assess
and evaluate its financial position to determine whether the company fulfills the qualitative and
quantitative criterions to determine eligibility of the bank to get the loan (Bijak, Thomas &
Mues, 2018). A detailed discussion on the financial performance and position of the company
with the help of financial statements shall help us to determine whether the company is eligible
for the required amount of loan to materialize its expansion strategy.
About the company:
Maxis Communications also known as Maxis Berhad is one of the largest communication
service providers in the Malaysia. Headquarter of the company is situated in Kuala Lumpur. The
company provides different types of services and products related to communication and
information technology to the consumers in the country. It also serves large, medium and small
business enterprises to help them conduct their communication affairs in orderly manner
(Buckley, 2018).

CREDIT ANALYSIS AND LENDING MANAGEMENT
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Loan requirement and the objective of application for loan:
As already discussed that the company is looking to expand its facilities and infrastructure and
thus, requires RM50.0 million to finance the expansion strategy. The objective of the company is
to improve its standing in the market further and emerge as one of the large communication
service providers in Asia (Travaglini, 2018).
Evaluation of company’s capacity to borrow the required funds:
As already pointed out at the beginning of the document that an entity primarily has two sources,
i.e. internal and external sources to generate required amount of fund necessary to finance an
expansion of strategy. As the internal sources is out of question and the company has decided to
apply for a loan of RM50.0 million it is up-to the bank to decide whether to approve the
application for the loan of RM50.0 million or not. In order to decide on the fate of the loan
application of Maxis Communications the bank would evaluate the capacity of the company to
borrow and repay the installments for such loan amount on or before the due time. Accordingly,
let us proceed towards evaluating the capacity of the applicant to borrow necessary funds for its
expansion (Doorasamy, 2016).
Quantitative analysis:
Quantitate analysis include evaluating the financial performance and position of the company
over the last five or more years to determine whether the company has the capacity to generate
necessary revenue to repay the loan installments without any failure. Only after quantitative
analysis of the company any bank can decide whether to accept or reject the loan application of
the company. Accordingly, let us proceed towards evaluation of financial performance and
position of the company by using its financial statements (GEORGIEV, 2017).

CREDIT ANALYSIS AND LENDING MANAGEMENT
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The financial performance of the company:
In order to assess the financial performance of the company over the last five years it is essential
to have the income statement of the company over the same duration. The income statement
below has been prepared for the duration of last five years from the five different annual reports
of the company to accumulate the data in one place to assess the financial performance of the
company necessary for quantitative analysis.
INCOME STATEMENT OF MAXIS BHD
All amounts are in MYR millions 2014-
12
2015-
12
2016-
12
2017-
12
2018-
12
Gross reveneu earned 8,389.
00
8,601.
00
8,612.
00
8,696.
00
9,192.
00
Less: Direct cost of revenue 2,707.
00
2,728.
00
2,722.
00
2,940.
00
4,139.
00
(A): Gross profit 5,682.
00
5,873.
00
5,890.
00
5,757.
00
5,053.
00
Less: Operating expenses
General administrative and selling
expenses
1,703.
00
1,767.
00
1,876.
00
160.
00
211.
00
Other expenses 1,172.
00
1,241.
00
870.
00
2,230.
00
2,016.
00