WorksheetsPre Exam CICC Day 12
Total questions: 20
Worksheet time: 31mins
At the most basic level, how should you proceed if you are not totally comfortable with management’s willingness to pay debts?
Seek additional security in the form of cash deposits
Strengthen the credit through the addition of a guarantor
Seek additional security with a collateral mortgage
Decline to enter into a credit relationship with the business
For the purpose of assessing management risk, what could potentially provide the least valuable view of the management’s integrity?
Reviewing the loan term of prior loan
Reviewing willingness to work with the lender when cash flow problems occur
Reviewing prior compliance with covenants
Reviewing conduct of other accounts
What would not be indicated in the account status section of a personal credit report?
If loan is current
Type of credit facility
Past delinquency
Any repossessions
In what way does reliance on audited financial statements affect the determination of management integrity risk?
It eliminates integrity risk, regardless of the auditor
It requires the lender to more closely scrutinize financial information
It mitigates management integrity risk because auditors verify whether financial records are in accordance with accepted accounting standards
It masks integrity issues under the guise of a trusted third-party opinion
When reviewing a credit agency report, a lender would be most comfortable extending credit to a borrower who has a concentration of trade payments made in which period relative to payment terms?
90+ days
0-30 days
61-90 days
31-60 days
What is the primary purpose of reviewing internal bank records and references made directly with other banks?
Determine loan payment history
Determine loan utilisation history
Determine cash balance history
Determine cash deposit history
Which statement about the use of credit references or reports on a business’s principals and personal guarantors is correct?
If they reflect late payments, they almost always point to management integrity problems
If they do not contain negative information, they indicate that management integrity is sound
They are unhelpful in assessing integrity because borrower management provides the information in the responses.
They may provide information that helps in the evaluation of management integrity
For which business would it be easiest to identify integrity issues?
A company that borrows from another financial institution and that has covenants with that bank
A company that borrows from your financial institution and that has no covenants with your bank
A company that borrows from your financial institution and that has covenants with your bank
A company that borrows from another financial institution and that has no covenants with that bank
Which statement about a business owner’s personal payment history is correct?
If it does not reflect any payment defaults, then management integrity is sound
If it is irrelevant when attempting to determine integrity risk of the business
It may often be a better indicator of integrity than the payment record of the business
It is not a good indicator of integrity
What is meant by the term “amount owing” on a credit agency report?
The normal terms of sale extended by the supplier
The greatest amount of credit extended
The date or amount of time since the latest sale was made
The debt due by a business at the time of the survey and the status of that amount (current, amount past due)
What information would you not expect to find on a personal credit report?
Satisfied judgments
Security fillings
Tax charges
Bankruptcies
Which of the following best defines management succession planning?
The process a business employs to ensure that managers have replacements for key suppliers to ensure the supply chain is always intact
The process a business employs to ensure that managers have replacements groomed and ready to step in if the current managers leave the business
A recruiting tool to attract talented managers by providing insurance so that a manager’s family is taken care of in the event of the manager’s death
A recruiting tool to attract talented managers by ensuring that managers are promoted within 18 months of starting their position
Which of the following is not one of the five management responsibilities?
Marketing
Forecasting
Sales
Production
What are the three typical levels of oversight in the corporate governance process?
Regulators, board of directors, executive officers
Shareholders, regulators, executive officers
Shareholders, board of directors, regulators
Shareholders, board of directors, executive officers
Which are the commonly accepted principles in a market-oriented corporate governance model?
I. Social responsibility
II. Role and responsibilities of the board
III. Recognition of stakeholder interests
IV. Rights and equitable treatment of shareholders
II, III and IV only
I, III and IV only
I, II and III only
II and III only
Select the statement that best describes how effective governance of a business influences financial performance
May impact cash flow and ability to repay debt
May impact cash flow and not ability to repay debt
Has no impact on cash flow or ability to repay debt
May impact ability to repay debt but not cash flow
Under what conditions might temporary position overload in the management structure be necessary?
The marketing manager consolidates his influence by quickly firing a manager
A lender requests a sudden removal of a top-level executive from the management team
The sudden departure of a key top-level executive
The planned retirement of the CEO or director
Under which scenario might a small business carry excessive credit risk?
The CEO or director also serves as key executive
The chief information officer serves on the board of directors
The director of marketing also serves on the executive committee
The owner manages both the business’s finances and its sales team
What is the most likely direct consequence of insufficient management debt?
Liquidity issues
Position overload
Excess overhead expense
Solvency issues
Under what scenario is key person insurance most likely to benefit a business?
Receptionist dies suddenly
Senior manager is fired
Business as usual
CEO has an accident
