WorksheetsMoody's Practice Test 2
Total questions: 100
Worksheet time: 50mins
Name
Class
Date
1.
What is the main purpose of conducting a competitive analysis during the loan pricing decision process?
a)
To calculate the lowest lending rate the bank is willing to apply to theloan
b)
To determine the probability of loss based on the competitor’s ratepricing
c)
To persuade the relevant committee to approve a lending rate lower than those of competitors.
d)
To determine whether the lending rate should be adjusted based on the ceiling established by other lenders.
2.
What part of the loan pricing process sets an interest rate floor, below which the loan is financially undesirable?
a)
Cost analysis.
b)
Loanstructuring
c)
Loanaccounting.
d)
Competitive analysis
3.
What is meant by the term “excess borrowings” under the Tandon Committee approach to lending?
a)
The amount borrowed exceeds current liabilities
b)
The liquidity level exceeds the minimum required.
c)
The maximum permissible bank borrowings exceed current assets.
d)
The minimum required net working capital exceeds the actual amount.
4.
Which describes the absolute priority rule with respect to payments made to creditors at default?
a)
Subordinated debt is paid before insolvency-related costs.
b)
Available funds are paid first to the lowest ranked class until the borrower’s obligations are fully satisfied.
c)
Available funds are paid first to the highest ranked class until the borrower’s obligations are fully satisfied
d)
Distributions to each ranked class are paid out proportionately based on its percentage in the company's capital structure
5.
At what stage in the management cycle should the management consider the effect of changes in the external environment on the company’s business goals?
a)
Assessing business needs
b)
Developing plans to meet goals
c)
Aggregating and organising resources.
d)
Adjusting plans, resources, and methodologies.
6.
What factor plays a key role in influencing the industry due to a large bargaining power of a significant supplier?
a)
Labour disruptions
b)
Liberal credit terms
c)
Decreased sales prices
d)
Improved service levels
7.
How might an inadequate management succession plan affect a business’s cash flow?
a)
Training the new managers to address their skill gaps may result in excessive costs.
b)
Cost of hiring for the positions vacated due to promotion of the new managers will impact the cash flow.
c)
Weak relationship of the new managers with the bank staff may result in the credit facilities not being renewed
d)
Poor decisions of the new managers that lack sufficient skills or experience might result in weaker business performance.
8.
Which best describes the effect that political decisions and frequent legislation changes in India have on its business and industry risk?
a)
Banks absorb most of the impact and businesses are less affected as a result.
b)
Taxation policies cause businesses to be less transparent in their financial reporting.
c)
Opportunistic decisions that influence monetary policy can negatively affect a business’s financial performance
d)
Demonetisation of high denomination currency notes is an example of legislation that negatively affects small businesses working with cash.
9.
What is considered as one of the three levels of oversight in the corporate governance process?
a)
The media.
b)
The regulators.
c)
The board of directors
d)
Banks and other lenders
10.
How can a company’s management best minimise the impact of potential interruptions in the input supplies?
a)
Obtain supplier insurance
b)
Hold large stocks for all key supply inputs
c)
Maintain good personal rapport with the key input suppliers.
d)
Ensure that there is an alternate supply source for all key inputs.
11.
Which state of the economy has a neutral impact on credit risk?
a)
Contraction.
b)
Recovery.
c)
Growth
d)
Stability.
12.
Which proposition is least likely to be considered for a term loan for its financing requirements?
a)
Expansion of a fleet of vehicles.
b)
Capital expenditure for a power plant
c)
An instalment financing construction project.
d)
Daily working capital requirements for a small business.
13.
Which lists the primary components of India’s corporate debt restructuring (CDR) system?
a)
Debtor-creditor agreements, inter-creditor agreement
b)
CDR Standing Forum, CDR Empowered Group, CDR Cell.
c)
Multiple banking accounts, syndications, consortium account
d)
Repayment period, repayable amount, instalment amount, interest rate.
14.
What is the benefit of setting meaningful forecast assumptions in the overall projection process?
a)
To confirm future loan payments will be achievable.
b)
Assumptions depend on the results of the projections
c)
To reflect factors independent of management’s past performance.
d)
To enable a realistic assessment of the projected financial performance that a credit decision is substantially based on.
15.
XYZ trucking company (XYZ) has recently entered into an arrangement with an online sales business to deliver their general consumer goods and expect that this partnership will improve their sales. XYZ has sought enhanced financing to support this new business. The transportation industry is in a decline due to a recession, and XYZ’s most recent annual financial statement shows relatively weak sales performance. What is the next step in assessing XYZ’s credit application?
a)
The assessment should end, and credit should be declined.
b)
The assessment should be postponed until the industry enters the recovery stage.
c)
The assessment should continue and focus on total profit as a measure of success.
d)
The assessment should continue with more focus on the sales projections scenarios and cash flow impact.
16.
In what type of security charge are goods and raw materials commonly pledged as assets?
a)
Assignment.
b)
Hypothecation.
c)
Lien
d)
Mortgage.
17.
An increase in which item will increase a borrower’s debt service coverage ratio?
a)
Loan interest.
b)
Loan collateral.
c)
Cash flow from operations
d)
Scheduled principal repayment
18.
Which is an example of a liquidity early warning signal?
a)
Rising corporate bond prices.
b)
Non-consolidation of subsidiaries’ accounts
c)
Frequent overdrafts that are covered in a few days.
d)
A large cheque that is returned for insufficient funds.
19.
When allowing a customer to draw under a domestic bill discounting facility, why is it important to confirm that there is an underlying movement of goods?
a)
To ensure that the transaction is not a one-off.
b)
To avoid providing financing for intergroup transactions
c)
To reduce the possibility of providing accommodation finance.
d)
To ensure that financing is provided only for goods that have been shipped to existing customers
20.
During which implementation phase of deal structure is counsel instructed on documentation and covenant definition issues?
a)
Design.
b)
Drawdown.
c)
Monitoring.
d)
Negotiation.
21.
In what type of feasibility assessment is a project’s maximum debt to equity ratio reviewed?
a)
Cost of project.
b)
Economic viability
c)
Means of finance.
d)
Technical viability.
22.
What is a characteristic of a good business plan
a)
Setting measurablegoals.
b)
Setting businessobjectives
c)
Being reactive to changing demand
d)
Defining who is accountable to the plan
23.
Which source of external information about a company’s past behaviour can be used to assess its management integrity?
a)
Discussions with management
b)
Details of dividends paid over the last five years.
c)
Opinion about management included in credit agency reports.
d)
Account statements showing whether the company has met its obligations to the bank on time
24.
What causes market overcapacity?
a)
Industry growth.
b)
Weak competition.
c)
Drop in a sales price.
d)
Low product demand.
25.
What type of risk is the risk that credit exposure is not adequately structured?
a)
Facilityrisk.
b)
Financialrisk
c)
Industry risk
d)
Management risk.
26.
Which describes the absolute priority rule with respect to payments made to creditors at default?
a)
Subordinated debt is paid before insolvency-related costs
b)
Available funds are paid first to the lowest ranked class until the borrower’s obligations are fully satisfied
c)
Available funds are paid first to the highest ranked class until the borrower’s obligations are fully satisfied.
d)
Distributions to each ranked class are paid out proportionately based on its percentage in the company's capital structure
27.
Company A had outstanding trade payable for an average of 44 days in Fiscal Year-End (FYE) 1 and 41 days in FYE 2. Company B had outstanding trade payable for an average of 52 days in FYE 1 and 55 days in FYE 2. Which of Company A or Company B is most likely to borrow funds, and why?
a)
Company A due to reduced cash flow.
b)
Company B due to reduced cash flow.
c)
Company A due to increased cash flow.
d)
Company B due to increased cash flow.
28.
What will have the biggest effect on the risk premium when pricing a loan?
a)
The term of the loan.
b)
The bank’s growth strategy.
c)
The expected loss of the loan.
d)
The expected return on equity.
29.
What must a lender do to assess the effect of a company’s capital expenditures on its cash flow?
a)
Use accumulated depreciation to estimate net cash flow.
b)
Determine asset value and compare to expected revenues.
c)
Review increased capital assets and evaluate serviceability.
d)
Understand the purpose of spending and changes in cash flow.
30.
What effect would a decrease in a business’s sales growth during a recession have on cash flow?
a)
Long-term decrease.
b)
Long-term increase.
c)
Short-term decrease.
d)
Remains consistent.
31.
Which factor can make it difficult to project a business’s financial performance based on historic trends?
a)
Past operating results.
b)
Management’s future plans.
c)
Economic and competitive environments.
d)
Minimum rate for the lender’s return on assets.
32.
In which scenario would customer concentration cause significant cash flow risk for a business?
a)
The business sells clothing to individual consumers.
b)
The business distributes flour to most bakeries in the region.
c)
The business supplies specialised parts to the largest auto maker.
d)
The business provides cleaning services to schools, offices and residential buildings.
33.
What is the primary function of stock statements in the administration of fund-based working capital limits?
a)
To calculate drawing power.
b)
To provide evidence that can be used in legal proceedings.
c)
To provide monthly movement in the level and quality of inventory and receivables.
d)
To indicate the aging profile of inventory and receivables for calculation of the eligible items.
34.
What type of opinion does an auditor provide when it disagrees with the information and/or conclusions in a company’s financial report?
a)
Adverse.
b)
Strong.
c)
Qualified.
d)
Unqualified.
35.
According to the Indian Companies Act, within what period of the creation of a security charge must it be registered, including the maximum permitted period of condonable delay?
a)
30 days.
b)
300 days.
c)
1 year.
d)
5 years.
36.
What is the primary purpose of calculating drawing power in a funds-based working capital facility?
a)
To determine the amount the customer can draw on.
b)
To ensure that bank funds are not tied up in obsolete stocks.
c)
To ensure that drawings are being used to fund current assets.
d)
To check that the value of eligible assets is at least equal to the approved credit limit.
37.
Which type of security can be used in a pledge charge?
a)
Building.
b)
Finished goods.
c)
Heavy equipment.
d)
Life insurance contract.
38.
What information in a credit agency report can help a bank assess a company’s management integrity?
a)
Opinion about the company management.
b)
Information about the financial performance.
c)
How freely the management shares information.
d)
Details on covenant compliance for the bank loans.
39.
What is one benefit of cash accounting?
a)
It provides a cash-flow-based statement of profit and loss.
b)
It records cash and non-cash components of a transaction.
c)
It records all transactions of a particular accounting period.
d)
It gives a complete view of the financial status of a business.
40.
Why does a special purpose vehicle expose a lender to more risk than conventional financing?
a)
The loan has no security guaranteed.
b)
The loan has no security guaranteed.
c)
The sponsor is the only party liable for the loan.
d)
The loan is repaid only from the project’s cash flows.
41.
Which action might a company take when it is in the cash concern stage of financial distress? <br />
a)
Selling vital assets.
b)
Cancelling bonuses.
c)
Laying off key employees.
d)
Eliminating management positions.
42.
What is a way to conduct an inventory check when verifying the entire inventory is not feasible?
a)
Conduct an ABC analysis.
b)
Review work in progress records
c)
Review Central Excise taxation records.
d)
Review Central Excise taxation records.
43.
At which stage of a business’s life cycle is it considered the most risky for credit approval?
a)
Start-up.
b)
Adolescence.
c)
Growth.
d)
Maturity.
44.
What previous management action is likely to raise doubt about management integrity and whether to enter into a credit relationship with a business?
a)
Tax planning.
b)
Making tweaks to reported accounts to mask a declining financial performance.
c)
Marginally increasing the dividend payout ratio compared to the previous financial year.
d)
Making changes to the board of directors and audit committee to increase the proportion of independent directors.
45.
Which party enforces a bank guarantee in the event of default?
a)
Applicant.
b)
Beneficiary.
c)
Government.
d)
Guarantor.
46.
What is the primary source of cash flow used in calculating debt repayment capacity?
a)
Sale of an asset.
b)
Peripheral rental fees.
c)
Extraordinary income.
d)
Cash generated from operations.
47.
What is meant by the term “excess borrowings” under the Tandon Committee approach to lending?
a)
The amount borrowed exceeds current liabilities.
b)
The liquidity level exceeds the minimum required
c)
The maximum permissible bank borrowings exceed current assets.
d)
The minimum required net working capital exceeds the actual amount
48.
What is the primary purpose of the loan pricing process?
a)
To assess the probability of loss in the event of default.
b)
To calculate the profitability of the loan transaction for the bank.
c)
To determine appropriate interest rate and fees in line with the risk assumed.
d)
To support the lender’s position in the negotiation process with the borrower.
49.
Which method of inventory valuation maximises a company’s net income during periods of inflation?
a)
Average cost.
b)
First-in, first-out
c)
Last-in, first out.
d)
Weighted average.
50.
Which action by a borrower’s management team could have an adverse effect on its cash flow and ability to meet its obligations?
a)
Adopting a conservative business planning strategy.
b)
Setting business plan objectives that are overly aggressive.
c)
Setting business plan objectives that are overly aggressive.
d)
Disclosing confidential information to other stakeholders on a need to know basis.
51.
What type of credit rating will most likely cause a borrower’s credit score to be adjusted downward because of an expected downturn in the borrower’s industry?
a)
Fail grade rating
b)
Single risk rating
c)
Facility risk rating
d)
External international rating
52.
Which describes the absolute priority rule with respect to payments made to creditors at default?
a)
Subordinated debt is paid before insolvency-related costs
b)
Available funds are paid first to the lowest ranked class until the borrower’s obligations are fully satisfied
c)
Available funds are paid first to the highest ranked class until the borrower’s obligations are fully satisfied
d)
Distributions to each ranked class are paid out proportionately based on its percentage in the company's capital structure
53.
What is the profit before tax and financial costs for a company with sales of INR 7,000,000, cost of goods sold of INR 3,600,000, operating expenses of INR 1,400,000, interest expense of INR 60,000 and tax expenses of INR 125,000?
a)
INR 815,000
b)
INR 940,000
c)
INR 2,000,000
d)
INR 1,185,000
54.
What is meant by the term “excess borrowings” under the Tandon Committee approach to lending?
a)
The amount borrowed exceeds current liabilities
b)
The liquidity level exceeds the minimum required
c)
The maximum permissible bank borrowings exceed current assets
d)
The minimum required net working capital exceeds the actual amount
55.
What type of credit rating is most appropriate to evaluate the credit risk of a group of borrowers that has never borrowed money before?
a)
Corporate family rating
b)
Issue rating
c)
Issuer rating
d)
Short-term rating
56.
Which item is evaluated more substantively when determining the amount of financing available to a company under the assessed bank finance method as compared to the maximum permissible bank finance method?
a)
Assets
b)
Current Ratio
c)
Liquidity
d)
Trade payables
57.
How should a customer’s account activity be monitored to ensure end-use of funds?
a)
Review a percentage of all the transactions
b)
Scrutinise all the transactions regardless of value
c)
Review the transactions above a threshold amount
d)
Browse through the account and investigate any unusual transaction
58.
Companies operating in which industry are most likely to have a high investment in fixed infrastructure assets, with little inventory?
a)
Electric utility
b)
Food retailing
c)
Home construction
d)
Financial services consulting
59.
Which factor will decrease a buyer’s market risk in the long term in conditions where the supplier has high bargaining power?
a)
Buyer’s ability to pay
b)
Increase in supplier’s market share
c)
Availability of substitute products in the market
d)
High demand skilled workers are employed by the supplier
60.
What information should be reviewed in the periodic progress reports on implementation of a project to assess likelihood of meeting the loan repayment obligations?
a)
The project implementation is on schedule
b)
Funding is available to cover any cost overruns
c)
There are orders for the project outputs once completed
d)
Project reports have been approved by the lender’s engineer
61.
Why is management integrity the most critical factor when assessing the impact of management risk on a company’s credit risk?
a)
Management lacking integrity may prioritise payments to other external stakeholders
b)
A lack of integrity can result in a company using cash flows for purposes other than interest or loan payments
c)
A lack of integrity can result in a company’s underperformance and subsequent inability to meet its payment obligations
d)
A positive assessment of management integrity is necessary for a lender to be confident in the reliability of the information provided by the company
62.
What governing body for the Insolvency and Bankruptcy Code would set up accreditation for insolvency professionals and information utilities?
a)
Adjudicating Authority
b)
Debt Recovery Tribunal
c)
Insolvency Professional Agency
d)
Insolvency and Bankruptcy Board of India
63.
Which proposition is least likely to be considered for a term loan for its financing requirements?
a)
Expansion of a fleet of vehicles
b)
Capital expenditure for a power plant
c)
An instalment financing construction project
d)
Daily working capital requirements for a small business
64.
What is the primary reason for reviewing external information when assessing a company’s credit quality?
a)
To evaluate any adverse press coverage of the company
b)
To assess the company’s vulnerability to natural disasters
c)
To review any gradual economic changes that may affect the company’s industry
d)
To evaluate what developments may create opportunities for the company or adversely affect its performance
65.
Which factor will most likely affect the length of time it takes to convert inventory to sales?
a)
New products
b)
Increased financing
c)
Management decisions
d)
Accounts payable growth
66.
What is the difference between a partnership firm and a Limited Liability Partnership (LLP)?
a)
If a partner dies a partnership firm continues to exist and an LLP dissolves
b)
An LLP is a separate legal entity from its members and a partnership is not a separate legal entity
c)
An LLP is governed by the Indian Partnership Act and a partnership firm is governed by the Companies Act
d)
The income from a partnership firm stays within the firm and LLP income is personal income for the partners
67.
How many days is the short-term financing gap for a company with 57 trade receivables days, 78 inventory days and 73 trade payables days?
a)
42
b)
62
c)
84
d)
178
68.
What is the first step for a management team in order to achieve results through the efforts of others?
a)
Set the strategic direction
b)
Source the necessary resources
c)
Incentivise the organisation in an effective manner
d)
Manage the critical business operations on a daily and long-term basis
69.
What type of non-fund-based lending facility would a buyer of goods and services use to guarantee a one-time payment?
a)
Export credit
b)
Letter of credit
c)
Overdraft
d)
Term Loan
70.
Which costs related to environmental hazards can have a significant negative impact on a company’s credit risk?
a)
Cost of insurance premiums
b)
Cost of hazardous waste clean-up
c)
Cost of compliance with environmental laws
d)
Cost of professional assessment of facilities for safety
71.
What general inference can be made about a company that has positive cash flow from operations, and that is borrowing and investing?
a)
It is starting up
b)
It is closing down
c)
It is restructuring
d)
It is acquiring other companies
72.
Which action by a borrower’s management could have an adverse effect on its cash flow and ability to meet its obligations?
a)
Adopting a conservative financing strategy
b)
Executing plans to ensure short-term goals are met
c)
Increasing the rate of depreciation resulting in reduced net income
d)
Disclosing information to other stakeholders on need to know basis
73.
What is the impact of low market entry barriers on competition within an industry and the financial performance of businesses’ operating within the industry?
a)
Increased competition, increased cash flow
b)
Increased competition, decreased cash flow
c)
Decreased competition, decreased cash flow
d)
Decreased competition, increased cash flow
74.
Which organisational structure can inhibit management’s ability to take decisions thus adversely affecting the company’s performance and credit risk?
a)
A pyramidal structure
b)
A centralised decision-making process
c)
A structure that has distinct divisions between different functions
d)
A structure in which roles and responsibilities are clearly documented
75.
Why does a special purpose vehicle expose a lender to more risk than conventional financing?
a)
The loan has no security guaranteed
b)
The sponsor has no established track record
c)
The sponsor is the only party liable for the loan
d)
The loan is repaid only from the project’s cash flows
76.
Which of the following statements is most accurate with regard to the impact environmental risk has on lending?
a)
Environmental risk can extend a lender's liability beyond the loss of principal and interest.
b)
Environmental risk decreases the lender's risk of loss of principal and interest.
c)
Despite environmental risk, a lender's liability is limited to the loss of principal and interest.
d)
Environmental risk has no impact on the extent of a lender's liability.
77.
What information about a borrower's customer base would likely be most relevant to assessing credit risk?
a)
The total number of the business's customers.
b)
The terms offered by the business to retain the best customers.
c)
The names of the business's largest and most loyal customers.
d)
The impact on cash flow if the business loses its largest customer.
78.
What are the most likely consequences of significant regulation (other than barriers to entry) on a business?
a)
Expenses increase while capital expenditures decrease.
b)
Expenses decrease while capital expenditures increase.
c)
Expenses and capital expenditures increase.
d)
Expenses and capital expenditures decrease.
79.
Which of the following is most accurate regarding the relationship between sales and business and industry health?
a)
Reviewing sales over six months should yield similar results to a 10-year review.
b)
Expanding sales imply a declining business or industry.
c)
Sales trends are not impacted by business and industry health.
d)
Declining sales imply a declining business or industry.
80.
As a recession approaches, which combination of borrower characteristics would cause a lender to be most concerned?
a)
Decreasing profitability, small market share and low gearing.
b)
Small market share, flat cash flow and low gearing.
c)
Marginal cash flow, flat profits and small market share.
d)
Declining profits, increasing gearing and declining cash flow.
81.
Which of the following statements is true regarding durable products?
a)
Non-durable product sales tend to lag durable product sales during a downturn.
b)
Demand for durable goods decreases as the macro economy enters a recovery.
c)
The most critical factor related to sales volatility is the durability of the product being sold.
d)
The durability of a product has no impact on the volatility of its sales.
82.
How do you arrive at a preliminary financial risk assessment?
a)
Conduct general research, then review and analyse ratios and cash flow.
b)
Conduct market research, then review and analyse ratios and projections.
c)
Conduct market research, then review and analyse ratios and cash flow.
d)
Conduct general research, then review and analyse ratios and projections.
83.
Which risk category is typically considered critical when addressing a borrower's overall credit risk?
a)
Sovereign risk.
b)
Audit risk.
c)
Management risk.
d)
Counterparty risk.
84.
How would you assess the repayment risk associated with a company with seasonal sales compared to one that has steadier sales throughout the year, all other things beingequal?
a)
The seasonal business will have lower repayment risk.
b)
The seasonal business will have higher repayment risk
c)
None of the above
d)
Both businesses have the same level of risk.
85.
Tea-Shop Ltd. finance their new store leases using 2/3rd debt and 1/3rd equity. Which of these events would reduce the risk for the lendinginstitution?
a)
Reduction in costs of tea
b)
Increase in store maintenance costs.
c)
Decrease in credit provided by suppliers
d)
Decrease in store sales with a constant operating margin.
86.
You see a news item that the Government has increased the minimum support price of sugarcane. Sugar production is expected to exceed the demand during the year and globally also there is abundant supply. What could be the implication sugarcompanies?
a)
There would be excess inventory of sugar cane with the sugar companies
b)
No implication for the sugar companies. They would push their output to their wholesalers
c)
No major implication. The companies will offload their production when prices improve
d)
This could have serious adverse implications for the sugar companies’ profitability and may lead to losses. In case the companies hold on to their output, it will have significant carrying costs which again would affect the profitability
87.
Best Bakers LLP bake and supply breads for retailers. In looking to expand their capacity to support a growing market, which form of financing would be most appropriate andwhy?
a)
Extending its existing overdraft facility because this type of funding provides maximum flexibility required due to the uncertain operating conditions that the expansion will create.
b)
Raising a new term-loan that can be secured against the new assets because this type of funding will provide secure financing over the operational life of the capital asset
c)
Raising new equity from shareholders because this type of funding is both long-term and relatively inexpensive compared to other forms of financing.
d)
Reducing its operating cycle to generate greater operating cash flows because this type of funding is free financing and will maximise the returns that the new assets will generate for shareholders.
88.
Describe the potential structural subordination risk of lending to a holdingcompany
a)
The holding company may have non-consolidated financial statements
b)
The holding company may have unrealistic projected revenues
c)
The holding company may have dated documentation
d)
The holding company may have limited operating assets
89.
Under what scenario is having insurance most likely to have a positiveeffect?
a)
Recession
b)
Political turmoil
c)
Earthquake
d)
Economic boom
90.
What is meant by the term "amount owing" on a credit agencyreport?
a)
The date or amount of time since the latest sale was made
b)
The normal terms of sale extended by the supplier
c)
The greatest amount of credit extended
d)
The debt due by a business at the time of the survey and the status of that amount (current, amount past due)
91.
Why is it preferable to make the disbursement of a term loan directly in favour of asupplier
a)
To whom the disbursement is made is immaterial
b)
This is only logical
c)
Direct disbursement to the supplier would facilitate quicker supply of equipment
d)
This is one of the ways to ensure that the disbursed funds are used for the purpose for which the term loan is sanctioned
92.
In a UCA cash flow statement, what is the calculation for "change incash"?
a)
Financing Surplus (Requirement) + Total External Financing
b)
Net Income - Total External Financing
c)
Financing Surplus (Requirement) - Total External Financing
d)
Net Income + Total External Financing
93.
For a lender assessing credit risk, what business is likely to have a credit agency report with the most meaningfulinformation?
a)
A non-borrowing small business
b)
A medium business with many suppliers
c)
A non-borrowing large business
d)
A small business with few suppliers
94.
What is the most important constraint in getting a pricing on a loan which is fully in accordance with the risk assessment?
a)
Bank’s pricing policy
b)
Profitability calculation
c)
Competitive scenario, since competition places a ceiling on pricing which may be acceptable to the customer
d)
Loan structuring
95.
Which statement about the cash flow coverage ratio is notcorrect?
a)
It uses accrual income values from the profit and loss statement
b)
It is a broader metric than the interest coverage ratio
c)
It is an indicator of the ability to pay interest, dividends and scheduled debt payments
d)
It focuses on internal cash flow
96.
Which statement is incorrect with respect to the legal documentation signed as part of the corporate debt restructuring (CDR)process?
a)
If the debtor agrees, the period of limitation can be extended beyond the standstill period
b)
The Debtor Creditor Agreement is part of the Standstill Agreement
c)
The standstill agreement does not apply to criminal action
d)
The Debtor Creditor Agreement and the Inter Creditor Agreement are signed at almost the same time, at the beginning of the Corporate Debt Restructuring (CDR) process
97.
Under Section 186 of the Companies Act, 2013, loan and investment by company, acompany
a)
Can lend money to any other company
b)
Can give a guarantee for a loan taken by any other company
c)
Can buy the securities of another company only to the extent of 60% of its own capital and free reserves
d)
Cannot do any of the above
98.
Which of the following is correct with respect to a banker’s right of lien?
a)
Ownership of goods is transferred to the bank
b)
Possession of the goods remains with the borrower
c)
The right of lien is subject to the law of limitation
d)
A general lien converts to a specific lien if the bank appropriates the lien towards a specific debt of the borrower
99.
Which critical skill for executives seeks to rally people in the business to further the enterprise's mission, accomplish its plans, earn the trust of colleagues and customers, and demonstrate and foster commitment to the business and itsgoals?
a)
Leadership
b)
Commitment
c)
Communication
d)
Knowledge
100.
You are examining a loan request for a short-term loan to cover working capital requirements. On examining the financial statements you establish that sales have fallen, the business has an operating loss, it has negative operating cash flow and there is a sharp increase in payable days outstanding. You establish that this is high risk loan application. How should you proceed with your financial analysis?
a)
You need not do further work with the financial statements and can reject the loan application
b)
You should examine the financial statements more carefully to see if there are any off balance sheet liabilities that may increase the level of risk
c)
You should examine the financial statements more carefully to see if there are any assets that might be sold to finance the loan
d)
You should examine the financial statements more carefully to see if there are any opportunities to turn around the business
100 %
