Pre Exam CICC Day 6

Which of these requirements is a restrictive covenant?

• Financial statements shall be submitted every month.

• A clause specifying a ceiling on debt to EBIDTA ratio.

• A clause stipulating non-disposal of assets.

What is a negative pledge?

• Charging the same asset to more than one lender.

• Charging the asset to a lender with the right to cancel the charge at any time.

• An undertaking not to charge a certain asset to any other lender.

What does the value of plant and machinery, as collateral, mostly depend on?

• Their age and location.

• Their age, maintenance, and how specific they are to a particular process.

• Maintenance and availability of substitutes.

A competitive style of managing conflict is effective in which?

• When a decision must be made in an emergency.

• When you must consider opposing concerns that are equally important.

• When you are dealing with opposing concerns that are equally important.

What is the basic function of a guarantee?

• A guarantee secures the lender’s loan exposure by providing the additional security of the guarantor’s assets.

• A guarantee provides support and a potential source of additional funds should the borrower default on their obligations, not meet credit covenants, or go into bankruptcy.

• A guarantee acts as a pressure point on the borrower not to default on their obligations and not to violate credit covenants.

Why do lenders set financial covenants?

• Financial covenants specify a performance level that a borrower should aspire to but is not held to.

• Financial covenants specify a minimum performance level that a borrower must attain or maintain.

• Financial covenants indicate a maximum performance level that a borrower must maintain at all times

What are some of the likely negative outcomes of adopting an avoidance approach when managing conflicts?

• Delay, resentment, team fragmentation, and poor decisions.

• Stress in the relationship, lack of time to find the best solution, and possible escalation and deadlock.

• A superficial understanding of the situation and less-than-innovative solutions.

What is the purpose of an event-based covenant?

• To set a financial course for the client to follow during the lifetime of the credit exposure.

• To give the lender control upon the occurrence of a specified event.

• To give the lender the capability to stop occurrence of a specified event.

Which statement about a guarantee is accurate?

• A guarantee provides security to the beneficiary.

• A guarantee provides both security and access to another set of cash flows to an unsecured creditor.

• A guarantee gives access only to another set of cash flows to an unsecured creditor.

What are some of the likely negative outcomes of adopting an avoidance approach when managing conflicts?

• Stress in the relationship, lack of time to find the best solution, and possible escalation and deadlock.

• A superficial understanding of the situation and less-than-innovative solutions.

• Delay, resentment, team fragmentation, and poor decisions.