Discussion questions 1. What characteristics should a business have before it can be considered 2. What are the various types of financial ratio that lenders use in ana 3. Explain the advantages and limitations of fihancial statements analysis. 4. What is break even analysis? Why should a lender be interested in 5. What is the diflerence between indexed analysis and common-size 6. What is discounted cashllow? What are the various discounted cash- to be financially sound lysing the financial position of a firm? break-even analysis? analysis? flow methods? 7. What is 'creative accounting? Explain by giving examples 8 Which ratios do loan officers generally use in credit assessment? 9. Imagine the current assets and current liabilities of a firm are $3200 and 52000 respectively. How much can the firm borrow on a short-term basis without reducing the current ratio below 15? 10. Read the comparative statement of financial position (below) and the statement of financial performance (page 86) of Imaginary Computers Limited. Prepare a credit assessment report using the techniques of financial statements analysis as explained in this chapter. Comment on the financial strengths and weaknesses of the firm. Imaginary Camputers Limited Statement of financial position as at 31 December (5000) 2002 7.5 5.7 1.2 5.2 6.5 28.1 2003 Share capital Reserves and serphis Long-lerm debt Shdet-temi bonk bonbwing Curvent liabilities lotal 4.33 0,8 28