Fitch Learning

Which of the following is NOT a key driver of cash flow from operations?

• Sales

• Capital Expenditure

• Operating Cost

• Changes in Working Capital

A company has a high operating leverage (operational gearing). Which of the following is TRUE? the company has:

• significant amounts of borrowing

• A flexible cost base

• Steady, predictable operating profit

• High proportion of fixed costs

Business risk is measured by:

• The amount of debt the company has

• The value of the assets the company has

• The volatility of cash flow profits over time

• The level of shareholder involvement in business

The usual components of net working capital or net trading assets are:

• Inventory + Accounts receivable + Accounts payable

• Inventory + Accounts receivable - Accounts payable - Accrued expenses

• Inventory + Accounts receivable + Fixed assets - Accounts payable

• Current assets - Current liabilities

Which of the following items would NOT cause a decline in the operating profit margin?

• Increased borrowing levels

• Increased competition

• Raw materials prices going up

• Heavy investment in fixed assets

The LEAST common form of payback for a holding company is:

• Third party support

• Refinancing

• Cash flow

• Asset sales

Which if the following is likely to cause a company's debt/EBITDA ratio to INCREASE?

• Refinancing short-term borrowing with a long-term bond

• An increase in interest rates

• Issuance of a convertible bond

• Issuance of cumulative preference shares

The key repayment source to analyse for an operating company is:

• Refinancing

• Third party support

• Cash flow

• Asset sales

Which of the following statements is CORRECT?

• A company with high business risk should have low financial risk

• A company with high business risk can also have high financial risk

• The financial risk a company can afford is determined by its assets

• The level of business risk should not influence the level of financial risk

The 4 steps in the analytic framework of credit analysis for all type of borrowers are:

• Purpose, sources of repayment, risk to repayment, debt structure

• Exposure profile, rangking, safeguards, pricing

• Macro consideration, business profile, financial analysis, corp. governance

• Historical analysis, cash flow drivers, forecast model, setting assumptions