A bank asks you to assess whether a mid-sized trading company in Dubai can take a new term loan. How would you analyse it?
What the interviewer wants to hear
- Understand the business, customers, suppliers and management
- Review financial statements, cash flow and working capital quality
- Leverage and coverage ratios such as net debt/EBITDA, interest cover, DSCR
- Project cash flows under base and stress cases
- Security, covenants and structure of the loan
Model answer
I would start with the business: what it trades, who its main customers and suppliers are, how concentrated they are, and how experienced the owners are. Then I would review at least three years of audited financials and focus on cash, not just profit: how operating cash flow compares with EBITDA, and how receivables and inventory ages are trending, because trading companies often get stuck with slow-paying customers. I would calculate leverage, such as net debt to EBITDA, interest coverage and DSCR including the new loan repayments. Next I would project cash flows over the loan life in a base case and a stress case, such as a 15% fall in sales or a 30-day increase in collection period, and see if DSCR stays above the bank threshold. Finally I would look at security, like receivables or property, personal guarantees, and suitable covenants and repayment structure.
Can you answer it under time pressure?
Take a timed hard round and get scored on every answer.
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