All right, so let's have a look at what we are expected to do here in this credit case in point. Well, basically the question we're being asked is, "Does the bank want to be in this credit?" So what would've happened here is a relationship banker or product team would've generated this loan opportunity. In other words, they would've spoken to Smithy.

Secondly, we would then perform a credit analysis on the borrower, and this is where we come in. So this is the first step that we are going to perform. We would do that analysis, looking at business risk, we would look at financial risk, and we would come up with an initial risk assessment. So steps two and three is where we are going to be working in this case in point. After the initial risk assessment, we could either reject the loan or we could take it further and start thinking about the structure of the loan. Once the structure's been thought out, we would prepare a credit memo, we would take that credit memo to present it to the credit committee. Once the credit committee has had a look at it, they could then reject the loan or if they don't reject it, then the loan is going to happen. The bank would then think about whether to hold this loan or syndicate it or trade it away.

Once that's been sorted out, we would negotiate the terms, disperse the fund to the borrowers. And once that's happened, we would then continue by monitoring the loan on an ongoing basis. Right, so what kind of analysis are we going to perform then? Well, first off, we're gonna look at business risk. We're gonna look at things like the company. How does it look on the inside, what's the size of it, market share, the products, is it innovative, et cetera? We will look at the industry. How's the industry performing, is it strong, steady, in decline, many competitors? The country we're operating in, is that safe? Do we have a good management? Do they have a plan? Do they have a track record? Next up, we would look at financial risk. What is the financial position of the company today, how does the earnings look, what are the strengths of the cash flows, and how does the liquidity position of the business look? And finally, we would look at debt capacity. Given these parameters, how much could the company borrow, what could a structure be, and how does that relate to how much the company actually needs? So the first thing I want you to do now is go away and study the supporting documentation to the case in point and think about assessing the company's business risk. I'll see you in a while.