STATISTICAL ANALYSIS CASE

Statistical Analysis Case



Table of Contents

Introduction3

Discussion3

Variables4

Graphical Analysis5

Scatter Plot Analysis7

Statistical Analysis9

Results of Hypothesis12

Conclusion13

References14

Appendices15

Appendix A15

Appendix B15

Appendix C16

Appendix D16

Appendix E17

Statistical Analysis Case

Introduction

The assessment investigates the credit worthiness of the client SafeCredit, which is financial services company and provides loans to the firms which are not necessarily sufficiently large to have a credit rating from one of the large credit rating agencies. Therefore, it is important and crucial for the SafeCredit to study about the firms' credit worthiness which will provide knowledge about the firms' possibility of getting default. As an analyst of PMC Inc., it is necessary to provide knowledge to the SafeCredit about the possibility of getting default by the firms in credit so that the SafeCredit can take appropriate measures to overcome the risk.

Discussion

In relation to the credit worthiness of the firms, the solvency of a company is defined for an undertaking to have sufficient resources to repay the credit that was granted by the SafeCredit (Paul, 2009, 113). Therefore, SafeCredit should analyze the resources of the firms so that it is known that the firms can repay their credit. After analyzing the resources that must satisfy the debt, it is necessary to determine whether the company is willing to make the payments actually due. This is where the background in accounting for credit prior to the SafeCredit becomes important.

To determine the creditworthiness of a company, Safe credit must get the balance sheet of the business along with the knowledge of probability of default, age of the firm, industry, debt ratio, geographical, region, total assets and price to book ratio. Safe credit should check the current amount of indebtedness of the firms. By comparing the ratio of current debt and income, it is possible to determine whether the borrower or the debtor may face another credit obligation without the risk of default.

For SafeCredit, it is necessary to evaluate the creditworthiness of a company as the failure to pay some clients or constantly late payment has a negative impact on the financial situation of the SafeCredit that have granted the credit (Richard, 2007, 215). When analyzing the creditworthiness of firms, SafeCredit should address the following issues that include whether the firm is able to meet its obligations on time, whether the firm is ready to fulfil them? The first question provides an answer to the analysis of financial aspects of the activities of the firms (Bruckheimer and Steward, 2009, 24). The second question is a legal one, as well as personal qualities associated with leaders of the firms.

Due to the fact that the companies differ greatly in the nature of its production and financial activities, to create a single universal and comprehensive guidelines for the study of credit and the calculation of indicators is not possible. In the current international practice, as there are no firm rules on this subject, so as to take into account all of the many specific characteristics of clients, is virtually impossible (Lawrence, 2008, 190). Therefore, SafeCredit should focus on the age of the ...