The following Teaching Notes present the suggested solutions. Appendix A provides a potential grading rubric, and Appendix B contains additional external resources that complement the case during in-class discussions or as supplemental readings. (The appendices are available for download, see the links in Appendix C.)
Kabbage's process has several similarities to the analytical procedures performed by financial statement auditors. First, Kabbage performs its analysis to assess the financial position of applicants, assign risk ratings, render lending decisions, assess borrowing fees, and determine maximum borrowing amounts. This process resembles preliminary analytical procedures. Second, Kabbage can examine trends such as sales growth, cash collections, margins (gross and profit), liquidity, and solvency. Similar ratios are often considered by auditors when completing preliminary analytical procedures. Third, Kabbage can correlate financial and non-financial data during its analysis. For example, when businesses have stable margins and consistent selling prices, the total number of units sold will...
