What is CMA in Banking?

What is CMA in Banking?

In Banking, CMA is short form of Credit Monitoring Arrangement. This is an excel sheet which will capture Operational Performance and Financial Position of borrowers and would enable the Bank to understand past, present and future (estimated) financial plans.

CMA will have 3 input sheets namely

Operating Statement
Liability Statement
Assets Statements

Past details for all the 3 statements will be picked from Audited Financials where as future details have be to estimated by the borrower and validated by Banker.

Let's see how a typical CMA will look like and

• what inputs should be given 
• what outputs will be generated
• what analysis have to be carried out, etc.

 in this video lecture.

Note: This lecture is part of my Online course

BANKING CREDIT ANALYSIS PROCESS
https://www.instamojo.com/caraja/banking-credit-analysis-process/

Preview this course by clicking image below

Difference between Debt and Equity

What is the difference between Debt and Equity?

Let's say you want to start a business and cost of business $100Mn.

For this you have to raise $100 Mn and then only you can use them.(for purchase of various assets like Land & Building, Plant & Machinery, Furniture & Fixtures, etc).

Let me break that -

Land & Building         $50Mn
Plant & Machinery      $50Mn
---------------------------------------
Total                            $100Mn
---------------------------------------

From where you got funds for buying these assets?

Is it from Owners or from outsiders?

In business, you can raise money from Owners as well as from Outsiders.

Bank Loan are outsiders money.
Debentures are outsiders money.
Suppliers credit is outsiders money.

It means you are borrowing from outsiders for funding your assets.

Owners when they invest, it will be called as Share Capital.  It is direct contribution by owners.

If business makes profit and owners doesn't take them home and allows them to be reinvested into business, then they are making indirect contribution.

Owners money will be called as Equity.
Outsiders money will be called as Debt.

Business needs can be funded in combination.

To know more, watch this lecture.




Note: This lecture is part of my Online course

FINANCIAL MANAGEMENT A COMPLETE STUDY
https://www.instamojo.com/caraja/financial-management-a-complete-study-online/