You are a lender tasked with analyzing a company's loan request. To meet your loan criteria, the company must have:

a. Coverage ratio and leverage ratio in excess of 1x and 5x, respectively.

b. The exceptions are Fintech, Technology, and Biotech firms, which qualify for a loan regardless of the coverage and leverage ratios.

c. If the loan amount requested (expressed as a multiple of EBITDA) is greater than 25% of the company's industry EV/EBITDA, the approved loan amount will be limited to 25% of the company's industry EV/EBITDA.

d. If the criteria for a loan are not met, output "Don't lend!"

e. For any industry selected, calculate the amount of approved loan expressed as a multiple of EBITDA in cell C25.

The company must have a coverage ratio (EBITDA to interest expense) in excess of 1x and a leverage ratio (total debt to EBITDA) not exceeding 5x. If the company meets these ratios, it is eligible for a loan.b. Exceptions for Fintech, Technology, and Biotech firms: These specific industries qualify for a loan regardless of their coverage and leverage ratios. Even if their ratios do not meet the criteria, they can still be approved for a loan. c. Loan amount limit: If the loan amount requested, expressed as a multiple of the company's EBITDA, exceeds 25% of the industry's EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization), the approved loan amount will be limited to 25% of the company's industry EV/EBITDA.

d. Non-compliance: If the company fails to meet any of the loan criteria mentioned above, the output will be "Don't lend!" indicating that the loan cannot be approved. e. Loan amount calculation: For any selected industry, the approved loan amount will be calculated as a multiple of the company's EBITDA and displayed in cell C25. By evaluating these criteria, we can determine if the company's loan request can be approved based on its financial position, industry, and requested loan amount relative to industry benchmarks.

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AngelinaGermanotta AngelinaGermanotta · Answer 2 · 2023-09-25T21:14:38-04:00

Final answer:

Lenders must evaluate the financial health of the borrowing company using a set of ratios, such as the coverage ratio and leverage ratio. Exceptions exist for Fintech, Technology, and Biotech firms. The loan amount approved can't exceed 25% of the company's industry EV/EBITDA.

Explanation:

As a lender, you'll need to analyze the potential borrower's financial ratios to decide on their loan request. Specifically, a company needs a coverage ratio and leverage ratio exceeding 1x and 5x, respectively, to qualify. However, exceptions apply to Fintech, Technology, and Biotech firms, which may qualify regardless of their ratios. If the loan request is greater than 25% of the industry's EV/EBITDA, the approved loan should be limited to this threshold. If the company doesn't fulfill or exceed these criteria, the lender should refuse the loan. For an arbitrary industry, you can calculate the company's approved loan multiple of EBITDA in cell C25.

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