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/

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What is Financial Management?

Let's understand this with an example. Assume you are going to start a business. When you start a business, you should have an idea. 

• You should decide what are the assets you require.
• You should be in a position to estimate the total cost of the assets.

So, only if you have these two information, you will be able to start your business.

But this alone is not sufficient. 

• You have to run your business on daily basis. 
• Then you should know what is the cash required to run the business.

Now you have fair idea about the cash required to start and run a business. You should identify sources for funding business assets and also for running business.These sources can be 

• Owners funds or it can be from outsiders. 

Whether you raise the money from owners or outsiders, what you have to ensure is cost of these funds are as low as possible, only then the profits of the  business can be maximized.

To know more, watch this video 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/

ABC Analysis

What is ABC Analysis?

It is form of Inventory Control or Material cost control wherein we will be exercising control over materials by classifying them into 3 categories namely

Category A

Category B

Category C.

Why we should classify them into 3 categories?
Its because
Category A would generally be called as highly important materials.
Category B would be called as Moderately Important Materials.
Category C would be called as Least Important Materials.

If you see the value of materials in %, let's say the highly important materials constitutes 70% in value, moderately important materials constitutes 20% in value and least important material constitutes 10% in value. 

But if you take the % in Quantity, the highly important material which are 70% in value would be only 10% of total Quantity and moderately important materials may be 20% in Quantity and least important material which are 10% in value would be 70% in Quantity.

So now, we understand that there are 3 categories of material and certain material would be too huge in quantity but they are very less in value and certain materials are very less in quantity and too huge in value. 

So now, we can decide how we should place our control. It is not going to reward us if all our attention is on this 70%, because its value is only 10%. 

Our more attention should be on those materials though they are only 10% in Quantity, their value is 70%.

How our control should be?

To know more, view this lecture.

Please Note:
This video is part of my Online course

Cost Accounting A Comprehensive Study
https://www.instamojo.com/caraja/cost-accounting-a-comprehensive-study/

(c) CARAJACLASSES

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/

How to Write Bank Loan Proposal:

Understand, the core business of any bank is lending. If they want to make revenue and profit, they have to lend. Lending is the core activity and lending decision is taken based on the loan proposal submitted to the sanctioning authority.

When you submit a loan proposal to sanctioning authority, you should capture all essential information about the borrower, so that, sanctioning authority will be able to take very calculated decision . They can conclude whether they should sanction or reject. That's the importance of Loan Proposal.

In some banks it will be called as appraisal memorandum or appraisal note. This loan proposal in general will have two parts.

Part 1 - Executive Summary (Birds eye view of entire proposal - as proposal generally run for 40 -50 pages.) running for one or two pages will give overall view like Credit facilities asked, core activity, how their financials are, what pricing they are asking for credit facilities, what are the justifications, etc.

To know more, view this video lecture.



Note: This video lecture is part of course:

How to Write Bank Loan Proposal
https://www.instamojo.com/caraja/how-to-write-bank-loan-proposal/