The commissioner company, UPM-Kymmene Oyj (UPM), formed in 1995 in Finland, is a market leader in the bio and forest industries with long roots history. This thesis has been carried out for UPM’s Credit Risk Management Europe organization (CRM) in Tampere, in particular for the Risk Assessment team.
Sound and proactive credit risk assessment is a crucial part of credit risk management in every company including UPM for whom trade credit is a part of the customer strategy. Therefore, it is important for the commissioner to have a sophisticated tool for financial analysis which guarantees high quality risk assessment and brings added value through continuous professional development of the CRM team.
The primary goal of this paper was to develop an advanced tool for financial statements analysis for credit risk assessment purposes. The research for this final thesis was conducted in close cooperation with the commissioner company and the study was carried out via extensive literature reviews on financial and management accounting, business essentials and corporate finance. UPM’s objectives and guidelines for credit risk management have been closely studied to make sure that the new tool is in line with them and it meets the company’s necessary requirements. The sources of financial information on the commissioner’s customers available for CRM team were utilized as well. The key financial ratios have been chosen for designing the new analysis tool and guidelines for the tool application were developed.
It needs to be understood that despite the tool providing a theoretical background, basic knowledge of financial statements and the economics of organizations is required for its successful use. It is advised that financial ratios are compared against other companies within same industries and against previous years. The new tool helps to ask the right questions on an analyzed company’s business condition and financial health and benefits the CRM team with better quality analysis.
This thesis includes confidential information that has been removed from the published version on the commissioner’s request
