WorksheetsBusiness Credit Management Quiz
Total questions: 15
Worksheet time: 8mins
What is defined as the risk that a borrower will default in its repayment obligations?
Operational risk
Credit risk
Market risk
Liquidity risk
What is the responsibility of a Credit Officer in pursuing business opportunities?
Maximizing operational costs
Ignoring borrower's credit risk
Minimizing risk of loan losses
Avoiding credit evaluation
Which risk factor involves the daily operating cycle of a business?
Manufacturing process and production cycle risk
Supply risk
Product risk
Customer/sales and distribution risk
What does the analysis of product risk involve?
Supply availability risk
Obsolescence risk
Outsourcing risk
Credit term risk
How can lenders mitigate industry demands risk?
By structuring longer loan tenures
By avoiding lending to mature industries
Through ongoing research and product innovation
By ignoring industry regulations
What is important for lenders to assess in terms of management risk?
Product uniqueness
Market share
Revenue growth
Corporate culture
What is a key success factor for a borrower's business competitiveness?
Quality of products
Industry regulations
Number of competitors
Length of credit terms
How can lenders mitigate external factors risk?
By avoiding financial capacity
By ignoring technological changes
By controlling political stability
Through forward planning
What are the two most common ownership conflict risks faced by a company?
Operational risk and compliance risk
Shareholder/management squabbles and management succession risk
Financial risk and market risk
Credit risk and liquidity risk
What is the purpose of taking collateral in banking?
To reduce the loan amount
To mitigate credit risk for the lender
To provide comfort to the borrower
To increase the interest rate on loans
When is a loan classified as non-performing according to the guidelines?
When the borrower requests a loan extension
When the borrower misses a single payment
When the principal or interest is due and unpaid for six months or more from the first day of default
When the loan amount exceeds a certain threshold
What is the minimum provision required for a loan classified as 'Bad' after 12 months of default?
50%
20%
100%
10%
What action should be taken if there is a breach of lending covenants?
Increase the interest rate on the loan
Ignore it as it is common in banking
View it seriously as it reflects lack of shareholder commitment
Provide additional loans to cover the breach
What is the purpose of loan monitoring in banking?
To increase the paperwork for borrowers
To delay the loan repayment process
To identify early warning signals that may require remedial action
To identify business opportunities for the bank
What is the main objective of the guidelines on the classification of non-performing loans?
To increase the profits of the bank
To establish minimum standards for loan classification and provisioning
To make the loan process more complicated
To reduce the number of loans given by the bank
