Rawdah credit review

The engagement

Rawdah Home Retail Co. (a fictional home-furnishings retailer; all figures in SAR millions) has asked its relationship bank to increase its term loan. Before the credit committee meets, the bank's credit team needs a review of the last three years (FY2023–FY2025) that answers four questions: is the business still profitable, is it converting profit into cash, how much is tied up in working capital, and is it inside its loan covenants — with how much room to spare?

Rawdah's reported statements are on the Statements tab, including the FY2022 year-end balance sheet so that FY2023 averages can be calculated. Borrowings are all long-term, so current liabilities consist of trade payables only. FY2024 operating expenses include a non-recurring store-closure charge of 12.0, shown on its own line.

Deliverables

Complete every white cell with a formula linked to the Statements tab or to other workings — no typed numbers. The workbook will be re-tested with different statement figures, so typed results will be found.

Definitions (follow exactly)

• Same column = same year on every tab: C = FY2023, D = FY2024, E = FY2025 (column B on Statements is FY2022, used only as the opening balance).
• Average balances for ratios that compare a flow with a balance: ROE, DSO, DIO and DPO use (opening + closing) ÷ 2, where opening is the prior year-end. FY2023 uses the FY2022 balance.
• ROE = net income ÷ average equity.
• DSO = average receivables ÷ revenue × 365. DIO = average inventory ÷ COGS × 365. DPO = average payables ÷ COGS × 365. CCC = DSO + DIO − DPO.
• Year-end balances for point-in-time ratios: current ratio = current assets ÷ trade payables; net debt = borrowings − cash; net debt ÷ EBITDA uses reported EBITDA.
• Interest cover = EBIT ÷ interest expense (reported EBIT).
• Free cash flow = CFO − capital expenditure. Capex and dividends are shown as negative numbers on the Statements tab (cash outflows). FCF after dividends = FCF − dividends paid.
• Cash conversion = CFO ÷ reported EBITDA.
• Adjusted EBITDA = reported EBITDA + the non-recurring charge (it was deducted in arriving at EBITDA).
• Covenants (terms on the Assessment tab): net debt ÷ adjusted EBITDA must not exceed 2.0x; interest cover (EBIT ÷ interest) must be at least 4.0x. Show each test as TRUE when the covenant is met and FALSE when it is breached, using IF with the covenant cell (a test exactly at the limit is met).
• Headroom (FY2025): additional borrowing capacity = maximum leverage × adjusted EBITDA − net debt; EBITDA cushion = the percentage fall in adjusted EBITDA at which leverage would hit the maximum, 1 − net debt ÷ (maximum leverage × adjusted EBITDA); EBIT cushion = 1 − minimum cover × interest ÷ EBIT.
• No rounding. Results are graded to within 0.05%.

Data source

Rawdah Home Retail Co. is a fictional company created for this course. Its statements balance and reconcile; they are not based on any real business.