What is CMA Report?
The CMA report is also called the Credit Monitoring Arrangement report. The report indicates a company’s expected financial results and past performance. It consists of all the financial ratios and metrics needed to assist financial analysts and bankers in assessing a business’ financial fitness. To understand the flow and execution of funds in a sector, most Banking and Financial institutions require the borrower (business loan applicant) to prepare a Credit Reporting Agreement Report (CMA report). A carefully crafted CMA report will boost the possibility of a bank loan.
statements covered in the CMA report :
Particulars of current & proposed limits
The first Statement in the report of the Credit Management Agreement (CMA) notes the current credit restrictions, the utilization limits, and the history of the accounts and funds. Furthermore, the declaration also contains the borrower's proposed or applied cap. This paper is a fundamental document to be supplied to the banker by the creditor.
Operating statement
This is the second statement suggesting the business strategy for the creditor which shows current revenue, pre-and post-tax benefits, estimates of sales, direct & indirect spending, and a profit situation for three to five years. These conditions refer to a particular situation on the grounds of the creditor's application for working capital. This is a scientific study of the borrower's current & expected benefit potential.
Analyzing the Balance sheet
This is the third statement of the CMA data which includes an overview of the financial years that are present and expected. It helps include a complete overview of present and non-current assets, current and non-current liabilities, and the borrower's cash and bank balance. This declaration also specifies the borrower's net value status for years to come. As the name suggests, the balance sheet review provides a full summary of the borrower's financial situation.
Comparing statement of Current Asset & Current liabilities
This is the fourth statement that offers a comparative overview of existing asset and liability movement. In essence, the study aims to assess the borrower's capacity to fulfill the working capital needs for the timeframe and to meet the present working capital duration.
Calculating Maximum Permissible Bank Finance (MPBF)
This is the fifth and most critical statement. This requires a measure that demonstrates the full financial allowability of the bank. It illustrates the willingness of the borrower to borrow money.
Fund flow statement
The next statement is the Fund's existing & expected Flow Review. This study reveals a borrower's fund status in comparison to the expected deposits and estimates of the MPBF (Maximum Permissible Bank Finance). The main purpose of this declaration is to collect the movement of the fund for that time.
Ratio analysis
This is the last statement in the CMA report, which includes the most relevant financial ratios for financial analysts and bankers to use. The basic key ratio is a ratio of the net profits to liabilities, DP caps, MPBFs, Asset Turnover, current asset turnover, working capital, fixed asset turnover, debt/ equity ratio, etc. The key ratios are GP ratio, a ratio of net profit to profit, a quick ratio, a total stock turnover ratio.
documents required to prepare CMA
- Audited Financials 2 years ago
- Letter with the most recent sanction (in case of renewal)
- Current year’s provisional finance
- Schedule of Term Loan Redemption ( if any)
- Details (if any) of the planned modification with the words
