ACT Event 1

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OCCUPATIONAL CATEGORY

Accounting Application Series

INSTRUCTIONAL AREA

Financial Analysis

PARTICIPANT INSTRUCTIONS

PROCEDURES

1. The event will be presented to you through your reading of these instructions, including the Performance Indicators and Event Situation. You will have up to 10 minutes to review this information to determine how you will handle the role-play situation and demonstrate the performance indicators of this event. During the preparation period, you may make notes to use during the role-play situation.

2. You will give an ID label to your adult assistant during the preparation time.

3. You will have up to 10 minutes to role-play your situation with a judge (you may have more than one judge).

4. You will be evaluated on how well you meet the performance indicators of this event.

5. Turn in all your notes and event materials when you have completed the role-play.

PERFORMANCE INDICATORS

1. Interpret business policies to customers/clients.

2. Validate credit history. 3. Persuade others.

4. Calculate financial ratios.

5. Demonstrate the wise use of credit.

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EVENT SITUATION

You are to assume the role of the vice president of FIRST NATIONAL BANK. You will meet with

the loan committee leader (judge) of FIRST NATIONAL BANK to explain the procedures you

would follow in determining whether you would grant a loan to a customer.

In your capacity, you evaluate specific financial and personal criteria of each potential customer, and then present your decision on the loan request to the loan committee. They will approve the loan if appropriate

FIRST NATIONAL BANK is a full-service bank and a member of FDIC. The following services are

offered at your bank.

Personal checking Business loans

Business checking Visa banking card

High-interest savings Online banking

Automatic savings Lines of credit

Investment certificates After-hours depository

Installment loans 24-hour teller machine

Home improvement loans Motor banking

You are to review a Loan Application with the loan committee leader (judge) to determine if your bank will grant the loan request. Two major factors must be met before you can give your approval for this loan.

1. The debt coverage ratio must be at least 1.35/1 (income divided by debts). Determine this

ratio using monthly income divided by monthly expenses

2. The Risk Rating System must not exceed 23. (See attached schedule)

The Fair ISAAC Score is obtained through a credit bureau agency for a small fee. It evaluates the following five credit topics: (1) payment history, (2) amounts owed, (3) length of credit history, (4) new credit and (5) types of credit used. The Fair ISAAC Score for this customer is 705 points and the customer has never been 10 days past due on any debts.

You are to present your ideas to the loan committee leader (judge) who will evaluate your skills and knowledge in a role-play to take place in the committee leader’s (judge’s) office. The committee leader (judge) will begin the role-play by greeting you and asking you about the loan application. Once you have presented your thoughts and ideas and have answered the committee leader’s (judge’s) questions, the committee leader (judge) will conclude the role-play by thanking you for your work.

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Important personal, financial, and credit information gathered from the Loan Application form:

Name - John Doe

Address - 123 Acorn Street (3 years at this address) Dallas, Texas

Phone - 214-444-4545

Employer - Dallas Public Schools

Position - Teacher (3 years in this school district) Monthly income - $2,500 (take home - after taxes) Single/no dependents

Purpose of loan - purchasing a 2005 Honda Civic for $13,500 (14,000 miles – excellent condition) Amount of loan - $9,000

Length of loan - 3 years Monthly payment - $277

Bank References - First National Bank Checking account balance - $2,000 Savings account balance - $4,000 Monthly debts

Rent- $750 Car - $277 Visa - $200

MasterCard - $125 Student loan - $300

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Risk Rating Schedule:

Consumer Installment Risk Rating System

Collateral Risk (Type) + Collateral Risk (economic) + Credit Risk + Stability + 4 = Points 1 Passbook savings Points 1 90% of balance -passbook Points1 Clean Credit report Points1 Ten years on job

or time deposits 90%of balance - time Fair ISAAC Score 720plus Ten years same address

Points 2

Cash value life

insurance Points 2

80% of balance -passbook

Points

2 Never 10 days past due

Points

2 Seven years on job marketable securities 40% down payment Fair ISAAC Score 700-719 Seven years same address

Points 3 New auto or truck Points 3 30% down payment Points3 Never 30 days past due Points3 Five years on job 36 months financing Fair ISAAC Score 680-699 Five years same address

Points 4 Used auto or truck Points 4 20% down payment Points4 Never 45 days past due Points7 Three years on job none older than 4

years 48 months financing Fair ISAAC Score 660-679 Three years same address

Points 5

RV's, boats,

motorcycles Points 5 10% down payment

Points

9 New job 60 months financing

Fair ISAAC Score

640-659 New address

Points 6

Home equity, mobile home, household

furnishings Points 6 No down

payment-Points

Points

11 Numerous jobs unsecured

Fair ISAAC Score

620-639 Numerous addresses

Points 7 All vehicles over 5years old Points 7 Negative equity Points12 Delinquent 90 days now Points13 Unemployed Fair ISAAC Score

600-619

Add the points of each of the four columns plus 4

points

8 points equals Superior 12 points equals Excellent 16 points equals above average 23 points equals average Scores above 23 are not granted

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JUDGE’S INSTRUCTIONS

DIRECTIONS, PROCEDURES AND JUDGE’S ROLE

In preparation for this event, you should review the following information with your event manager and other judges: 1. Procedures and Performance Indicators

2. Event Situation

3. Judge Role-play Characterization

Participants may conduct a slightly different type of meeting and/or discussion with you each time; however, it is important that the information you provide and the questions you ask be uniform for every participant.

4. Judge’s Evaluation Instructions and Judge’s Evaluation Form Please use a critical and consistent eye in rating each participant. JUDGE ROLE-PLAY CHARACTERIZATION

You are to assume the role of loan committee leader of the FIRST NATIONAL BANK. You will be evaluating the

performance of your vice president (participant) in charge of loan approvals.

FIRST NATIONAL BANK is a full-service bank and a member of FDIC. The following services are offered at your

bank.

Personal checking Business loans

Business checking Visa banking card

High-interest savings Online banking

Automatic savings Lines of credit

Investment certificates After-hours depository

Installment loans 24-hour teller machine

Home improvement loans Motor banking

As part of the evaluation process, you will meet with the vice-president (participant) to evaluate the effectiveness of his/her decision in approving or not approving a new loan for the purchase of a used Honda Civic. The vice president (participant) has been given financial and personal information for a customer to evaluate the credit worthiness of this customer.

The vice president (participant) should be able to explain the procedures he/she would follow when evaluating this customer. The customer must meet two important criteria if the loan is to be approved.

1. The debt coverage ratio must be at least 1.35/1 (income divided by debts). This ratio should be determined using monthly income and monthly expenses.

2. The Risk Rating System must not exceed 23 (see attached schedule).

The Fair ISAAC Score is obtained through a credit bureau agency for a small fee. It evaluates the following five credit topics: (1) payment history, (2) amounts owed, (3) length of credit history, (4) new credit, and (5) types of credit used. The Fair ISAAC Score for this situation/customer is 705 points and he/she has never been 10 days past due on any debts.

The vice president (participant) will present his/her ideas to you in a role-play to take place in your office. You will begin the role-play by greeting the vice president (participant) and asking to hear about the loan.

During the course of the role-play you are to ask the following questions of each participant:

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1. What debt coverage ratio did our applicant have based on the application?

2. What numerical figure did our applicant have for our Risk Rating System?

4. If a customer does not meet the criteria for loan approval, how would you deal with that situation?

3. Is it important to sell the other services of the bank to our customers?

Once the vice president (participant) has presented his/her ideas and has answered your questions, you will conclude the role-play by thanking him/her for the work.

You are not to make any comments after the event is over except to thank the participant.

Answer for 1: $2,500/$1,652 = 1.51

Answer for 2: 20 points: column 1 (4 points), column 2 (3 points), column 3 (2 points), column 4 (7 points), plus 4 points = 20 (average to above average).

Important personal, financial, and credit information gathered from the Loan Application form:

Name - John Doe Address - 123 Acorn Street (3 years at this address) Dallas, Texas

Phone - 214-444-4545

Employer - Dallas Public Schools

Position - Teacher (3 years in this school district) Monthly income - $2,500 (take home - after taxes) Single/no dependents

Purpose of loan - purchasing a 2005 Honda Civic for $13,500 (14,000 miles - excellent condition)

Amount of loan - $9,000 Length of loan - 3 years Monthly payment - $277

Bank References - First National Bank Checking account balance - $2,000 Savings account balance - $4,000 Monthly debts

Rent- $750 Car - $277 Visa - $200

MasterCard - $125 Student loan - $300

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Risk Rating Schedule:

Consumer Installment Risk Rating System

Collateral Risk (Type) + Collateral Risk (economic) + Credit Risk + Stability + 4 = Points

1 Passbook savings Points1 90% of balance - passbook Points 1 Clean Credit report Points 1 Ten years on job or time deposits 90%of balance - time Fair ISAAC Score 720plus Ten years same address

Points

2 Cash value life insurance Points2 80% of balance - passbook Points 2 Never 10 days past due Points 2 Seven years on job marketable securities 40% down payment Fair ISAAC Score 700-719 Seven years same address

Points

3 New auto or truck Points3 30% down payment Points 3 Never 30 days past due Points 3 Five years on job 36 months financing

Fair ISAAC Score

680-699 Five years same address

Points

4 Used auto or truck

Points

4 20% down payment

Points 4

Never 45 days past due

Points

7 Three years on job none older than 4 years 48 months financing

Fair ISAAC Score 660-679

Three years same address

Points

5 RV's, boats, motorcycles

Points

5 10% down payment

Points 7

Never 60 days past due

Points

9 New job 60 months financing

Fair ISAAC Score

640-659 New address

Points

6 Home equity, mobile home Points6 no down payment Points 10 Never 90 days past due Points 11 numerous jobs household furnishings unsecured Fair ISAAC Score 620-639 numerous addresses

Points

7 All vehicles over 5 years old Points7 negative equity Points 12 Delinquent 90 days now Points 13 unemployed Fair ISAAC Score

600-619

Add the points of each of the four columns

plus 4 points

8 points equals Superior 12 points equals Excellent 16 points equals above average

23 points equals average Scores above 23 are not granted

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JUDGE’S EVALUATION INSTRUCTIONS

Evaluation Form Information

The participants are to be evaluated on their ability to perform the specific performance indicators stated on the cover sheet of this event and restated on the Judge’s Evaluation Form. Although you may see other performance indicators being demonstrated by the participants, those listed in the Performance Indicators section are the critical ones you are measuring for this particular event.

Evaluation Form Interpretation

The evaluation levels listed below and the evaluation rating procedures should be discussed thoroughly with your event chairperson and the other judges to ensure complete and common understanding for judging consistency.

Level of Evaluation Interpretation Level

Exceeds Expectations Participant demonstrated the performance indicator in an extremely professional manner; greatly exceeds business standards; would rank in the top 10% of business personnel performing this performance indicator.

Meets Expectations Participant demonstrated the performance indicator in an acceptable and effective manner; meets at least minimal business standards; there would be no need for additional formalized training at this time; would rank in the 70-89th_{percentile of business personnel}

performing this performance indicator.

Below Expectations Participant demonstrated the performance indicator with limited effectiveness; performance generally fell below minimal business standards; additional training would be required to improve knowledge, attitude and/or skills; would rank in the 50-69th_{percentile of}

business personnel performing this performance indicator.

Little/No Value Participant demonstrated the performance indicator with little or no effectiveness; a great deal of formal training would be needed immediately; perhaps this person should seek other employment; would rank in the 0-49th_{percentile of business personnel performing}

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JUDGE’S EVALUATION FORM

ACT-09

Financial Analysis

DID THE PARTICIPANT:

1. Interpret business policies to customers/clients?

Little/No Value Below Expectations Meets Expectations Exceeds Expectations

0, 2 4, 6, 8 10, 12, 14 16, 18

Attempts at interpreting business policies to customers/clients were inadequate or weak.

Adequately interpreted business policies to customers/clients.

Effectively interpreted business policies to customers/clients.

Very effectively interpreted business policies to customers/clients.

2. Validate credit history?

0, 2 4, 6, 8 10, 12, 14 16, 18

Attempts at validating credit history were inadequate or weak.

Adequately validated credit

history. Effectively validated credit history. Very effectively validated credithistory.

3. Persuade others?

0, 2 4, 6, 8 10, 12, 14 16, 18

Attempts at persuading others were weak or incorrect.

Adequately persuaded

others. Effectively persuaded others. Very effectively persuaded others.

4. Calculate financial ratios?

0, 2 4, 6, 8 10, 12, 14 16, 18

Attempts at calculating financial ratios were inadequate or unclear.

Adequately calculated

financial ratios. Effectively calculated financial ratios. Very effectively calculated financial ratios.

5. Demonstrate the wise use of credit?

0, 2 4, 6, 8 10, 12, 14 16, 18

Attempts at demonstrating the wise use of credit were inadequate or weak.

Adequately demonstrated the

wise use of credit. Effectively demonstrated thewise use of credit. Very effectively demonstrated the wise use of credit.

6. Overall impression and response to the judge’s questions.

0, 1 2, 3, 4 5, 6, 7 8, 9, 10

Demonstrated few skills; could not answer the judge’s questions.

Demonstrated limited ability to link some skills; answered the judge’s questions adequately.

Demonstrated the specified skills; answered the judge’s questions effectively.

Demonstrated skills confidently and professionally; answered the judge’s questions very effectively and thoroughly. Judge’s Initials TOTAL SCORE

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