Retail Lending Certification Quiz 3

What is horizontal analysis primarily used for?

• To calculate profitability ratios

• To assess liquidity

• To compare changes in financial statement components

• To analyze asset structure

Which financial statement item growth is generally a sign of weak performance?

• Asset growth

• Profit growth

• Revenue growth

• Expense growth

What does the gross profit margin (GPM) indicate?

• Total assets divided by total liabilities

• Percentage of net profit over total revenue

• Percentage of gross profit over total revenue

• Total revenue minus total expenses

What is the formula for the Cash Conversion Cycle (CCC)?

• ITD + RTD - PTD

• PTD - ITD + RTD

• RTD + PTD - ITD

• ITD - RTD + PTD

What does a high Working Capital Requirement (WCR) ratio generally indicate?

• Insufficient cash to meet liabilities

• Sufficient cash to fulfill short-term liabilities

• High levels of debt

• Low asset turnover

What is the minimum Debt Service Coverage Ratio (DSCR) generally set by BFIs?

• 1.50

• 2.00

• 1.00

• 1.20

Which document is NOT typically used to verify business transactions?

• Bank statements

• Sales/purchase invoices

• Ownership documents

• Personal identification

What does vertical analysis compare financial statement items to?

• Total revenue

• Total assets

• Key financial statement components

• Current liabilities

What is the interpretation of a negative Working Capital Requirement (WCR)?

• High liquidity

• Current assets exceed current liabilities

• Current liabilities exceed current assets

• Sufficient cash on hand

Which type of analysis helps identify abnormal composition in financial statements?

• Profitability analysis

• Vertical analysis

• Efficiency analysis

• Horizontal analysis