Provide two reasons why it is important to document the credit proposal in a credit memorandum. (4 Marks)

3. You are engaged in a credit assessment and preliminary loan approval process. The assessment is for a long-established consumer products company that cooperates in a mature market, producing detergents and soaps globally, and wants to diversify its product line. The credit request is to purchase equipment to expand into herbal health products, which is a new sector in which the company has not previously been involved. The product is intended to be manufactured in Mexico, and will include new and previously untested technology. The client is looking for 100% financing and wants the borrower to be a newly established special purpose vehicle that will be secured by the new entitys assets and cash flows. The facility will also be unsupported by the parent company and extended on a stand-alone basis. Would you approve or decline the preliminary loan approval? If so, for what reasons? ( 8 Marks)

4. Select an industry, assuming you are reviewing the cash flow statements for a company in this industry, identify what, in your view, are the key cash drivers for the company? What type of credit risk do you feel the company is exposed to based on the cash flow analysis? (8 Marks)