What are reasonable assumptions when running financial profit analysis ?

[Jennifer]

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Given loan amount, interest rate, loan application cost, performance of loan (if having 90+DPD in the past 12 months), without knowing loan term, outstanding balance, if loan is default and etc., how to estimate financial profit? What assumptions can be made to calculate profit?

Thanks,

Jennifer

[Datura]

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You are correct. But it’s ok for you to assume the total amount as loss.

[Jennifer]

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Thanks for clarification.

[Datura]

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You have loan amount and interest rate, you can calculate revenue. And with the cost and bad rate, you can compute the expense and loss. Then you get profit. Isn’t it?

[Jennifer]

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Actually, my question is: for ‘bad’ loans, is it OK to take the total loan amount as loss?

In the project, the ‘bad’ loan is the one with 90+ DPD in the past 12 months. For ‘bad’ loans which don’t default, we can’t take the loan amount as the loss, correct? They just missed some payments. Even for default ones, the actual loss is the outstanding balance, not the loan amount.

[norahx]

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I’m wondering the same question, should we assume the bank lose all loan for Bad=1 case you have a or a given percentage of the loan amount?

[Justin]

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Yes, assume we lose all the loan amount.