Banking and Economic Development
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Questions and Answers

What is the most important activity of banks according to the given text?

  • Providing financial services
  • Extending loans (correct)
  • Accepting deposits
  • Investing in stocks

    • What is the primary goal of banks when disbursing credit?

  • To increase credit portfolio
  • To increase profitability
  • To contribute to economic development (correct)
  • To reduce risk

    • What percentage of total assets of commercial banks of Bangladesh constitutes loans and advances?

  • 65 percent (correct)
  • 50 percent
  • 70 percent
  • 80 percent

    • Why is effective management of loan quality crucial for banks?

    <p>To achieve a prudent risk-return mix</p> Signup and view all the answers

    What is the primary source of revenue for banks?

    <p>Credit</p> Signup and view all the answers

    What is the main risk associated with a bank's loan portfolio?

    <p>Risk of non-payment</p> Signup and view all the answers

    What is essential for maintaining a good credit portfolio?

    <p>Well-defined credit policy</p> Signup and view all the answers

    What is the ultimate goal of banks when managing credit risk?

    <p>To achieve a balance between risk and return</p> Signup and view all the answers

    What is the main objective of an Internal Credit Risk Rating System?

    <p>To assess the quality of individual borrower</p> Signup and view all the answers

    What happens if the wrong sector or industry is selected in the Internal Credit Risk Rating System?

    <p>The rating will not reflect the unique characteristics of the particular sector or industry</p> Signup and view all the answers

    If a borrower has multiple lines of business, how should the sector be selected?

    <p>The sector should be selected based on the highest revenue-generating business</p> Signup and view all the answers

    What should be done if no particular line of business can be singled out?

    <p>Use 'other industry-if manufacturing' or 'other service-if service'</p> Signup and view all the answers

    Who has the authority to sanction or approve loans?

    <p>The Managing Director (MD) and Board of Directors (BOD)</p> Signup and view all the answers

    What type of assets are Due from Affiliates classified as?

    <p>Non-Current Assets</p> Signup and view all the answers

    What is the purpose of the Internal Credit Risk Rating System in credit selection?

    <p>To select individual credits and set credit pricing</p> Signup and view all the answers

    What is the purpose of the Accumulated Depreciation account?

    <p>To decrease the value of Tangible Fixed Assets</p> Signup and view all the answers

    What is the purpose of the Internal Credit Risk Rating System in credit pricing?

    <p>To set credit terms and conditions</p> Signup and view all the answers

    What is the classification of Office Supplies in the balance sheet?

    <p>Current Assets</p> Signup and view all the answers

    What is the characteristic of the Internal Credit Risk Rating System?

    <p>It is a fully automated credit risk scoring system</p> Signup and view all the answers

    What is the purpose of the Retained Earnings account?

    <p>To record the company's profits</p> Signup and view all the answers

    What type of liabilities are Short Term Bank Borrowings classified as?

    <p>Current Liabilities</p> Signup and view all the answers

    What is the classification of Marketable Securities in the balance sheet?

    <p>Current Assets</p> Signup and view all the answers

    What is the purpose of the Directors Loan (subordinated) account?

    <p>To record the loans provided by directors</p> Signup and view all the answers

    What is the classification of Goods-in-transit in the balance sheet?

    <p>Current Assets</p> Signup and view all the answers

    What is one of the benefits of a well-thought-out loan proposal?

    <p>It can significantly shorten turnaround time</p> Signup and view all the answers

    What is the purpose of credit appraisal in selecting borrowers?

    <p>To select the right type of borrower and business</p> Signup and view all the answers

    What is one of the aspects that the RM assesses during credit appraisal?

    <p>All of the above</p> Signup and view all the answers

    What is the purpose of assessing the security offered by the customer?

    <p>To consider for credit decision</p> Signup and view all the answers

    What is used to grade the borrower in case of large loans?

    <p>Credit Risk Grading Score Sheet (CRGS)</p> Signup and view all the answers

    Who refers to External Credit Assessment Institution (ECAI) for credit rating?

    <p>Bank</p> Signup and view all the answers

    What is one of the sources of inputs for decision making?

    <p>All of the above</p> Signup and view all the answers

    What is the purpose of credit appraisal?

    <p>To assess the credit worthiness and risk profile of the borrower</p> Signup and view all the answers

    What is the primary goal of borrower analysis?

    <p>To assess the creditworthiness of a borrower</p> Signup and view all the answers

    What is the role of a credit officer in the borrower selection process?

    <p>To re-assess the borrower's position and ask for further clarification</p> Signup and view all the answers

    What is a key consideration for a bank when selecting a borrower?

    <p>The industry and type of facilities required by the borrower</p> Signup and view all the answers

    What does the bank do after being satisfied with the borrower's application?

    <p>Collects information from different sources, including CIB</p> Signup and view all the answers

    What is the purpose of Figure 3.2.1?

    <p>To outline the borrower selection process</p> Signup and view all the answers

    What is a crucial aspect of the borrower analysis?

    <p>Assessing the managerial and organizational aspects of the borrower</p> Signup and view all the answers

    Why does a bank conduct borrower analysis?

    <p>To reduce the risk of loan default</p> Signup and view all the answers

    What is the final stage of the borrower selection process?

    <p>Disbursing the loan to the selected borrower</p> Signup and view all the answers

    What is the main source of earning and cash flow of a bank?

    <p>Credits</p> Signup and view all the answers

    What is the organization of the manual defined by?

    <p>12 chapters</p> Signup and view all the answers

    What is the consequence of credit failure to a bank?

    <p>Bank failure may occur</p> Signup and view all the answers

    What is the name of the bank that the manual is specifically designed for?

    <p>NCC Bank Limited</p> Signup and view all the answers

    What is the focus of Chapter 5 of the manual?

    <p>Analyzing the Financial Viability</p> Signup and view all the answers

    What is the purpose of credit planning?

    <p>To ensure cash flow and earning</p> Signup and view all the answers

    What is the primary focus of Chapter 3 of the manual?

    <p>Activities of Credit Operations</p> Signup and view all the answers

    How many chapters does the manual have, including introduction?

    <p>12</p> Signup and view all the answers

    What is the primary objective of a credit appraisal exercise?

    <p>To justify the soundness of an investment proposal</p> Signup and view all the answers

    What are the various aspects of credit appraisal?

    <p>Financial, Technical, Socio-Economic, and Environmental</p> Signup and view all the answers

    What is the purpose of evaluating the managerial aspect of a credit proposal?

    <p>To assess the competence of the management team</p> Signup and view all the answers

    What is the ultimate goal of a feasibility study?

    <p>To evaluate the commercial viability of a project</p> Signup and view all the answers

    What is the importance of evaluating the socio-economic aspect of a credit proposal?

    <p>To assess the environmental impact of a project</p> Signup and view all the answers

    What is the role of a credit appraisal report?

    <p>To provide a detailed analysis of the investment proposal</p> Signup and view all the answers

    What is the primary focus of a credit appraisal exercise?

    <p>To justify the soundness of the investment proposal</p> Signup and view all the answers

    What is the importance of evaluating the financial viability of a project?

    <p>To determine the financial viability of a project</p> Signup and view all the answers

    What is the reason behind the financial sector's inability to comply with the implementation deadline?

    <p>Difficulty in applying environmental disciplines</p> Signup and view all the answers

    Why do banks perceive environmental hazards as a risk to their business?

    <p>Due to indirect costs and credit risks associated with environmentally deteriorated clients</p> Signup and view all the answers

    What is the consequence of lending to clients affected by environmental degradation?

    <p>Additional credit risk for the bank</p> Signup and view all the answers

    What does the Gross Margin ratio measure?

    <p>Profitability of sales</p> Signup and view all the answers

    What is the rule of thumb for the Operating Profit Margin ratio?

    <p>20% to 25% is better</p> Signup and view all the answers

    What is the purpose of the Guidelines on Environmental Risk Management?

    <p>To support Policy Guidelines for Green Banking</p> Signup and view all the answers

    What does the Return on Assets ratio measure?

    <p>Profitability of investments</p> Signup and view all the answers

    What is the indirect cost to banks associated with environmental degradation?

    <p>Credit risk and additional losses in the event of default</p> Signup and view all the answers

    Why do banks need to assess environmental risks?

    <p>To minimize their credit risk</p> Signup and view all the answers

    What is the rule of thumb for the SG&A ratio?

    <p>Lower is better</p> Signup and view all the answers

    What does the Return on Equity ratio measure?

    <p>Earning power on shareholders' equity</p> Signup and view all the answers

    What does a negative net operating cash flow indicate?

    <p>Unfavorable business conditions</p> Signup and view all the answers

    When did the Bangladesh Bank circulate the Guidelines on Environmental Risk Management?

    <p>January 30, 2011</p> Signup and view all the answers

    What is the impact of environmental problems on the value of real estate?

    <p>It diminishes the value of the property</p> Signup and view all the answers

    What is the purpose of the Depreciation ratio?

    <p>To measure the effect of depreciation on sales</p> Signup and view all the answers

    What should a credit analyst do when evaluating a company's negative net operating cash flows?

    <p>Evaluate each possible explanation to discover the economic forces responsible</p> Signup and view all the answers

    What does the Net Margin ratio measure?

    <p>Profitability of sales</p> Signup and view all the answers

    What does a positive net investing cash flow indicate?

    <p>Disinvestment in productive assets</p> Signup and view all the answers

    Why should a credit analyst investigate a company's capital expenditures?

    <p>To evaluate the company's investment in productive assets</p> Signup and view all the answers

    What is the rule of thumb for the Dividend Payout Rate ratio?

    <p>Lower is better</p> Signup and view all the answers

    What happens when a firm increases its investment in productive assets?

    <p>The firm's production and sales increase</p> Signup and view all the answers

    What is the result of higher surplus from operating activities?

    <p>Higher ability to repay</p> Signup and view all the answers

    What is the importance of evaluating the quality of investment made by a firm?

    <p>To evaluate the firm's investment in productive assets</p> Signup and view all the answers

    What is the relationship between investment in productive assets and surplus from operating activities?

    <p>Direct relationship</p> Signup and view all the answers

    What does the Sales to Total Assets ratio indicate?

    <p>The efficiency of assets in generating sales</p> Signup and view all the answers

    What is the rule of thumb for the Inventory in Days ratio?

    <p>Lower is better</p> Signup and view all the answers

    What does the Current Ratio measure?

    <p>The ability to pay off short-term obligations with current assets</p> Signup and view all the answers

    What is the purpose of the Quick Ratio?

    <p>To measure a company's ability to meet current debts with most liquid assets</p> Signup and view all the answers

    What is the rule of thumb for the Working Capital Components ratio?

    <p>Higher is better</p> Signup and view all the answers

    What is the primary concern of a short-term creditor, such as a bank, when evaluating the financial health of a borrower?

    <p>Liquidity of the borrower</p> Signup and view all the answers

    What do financial statements reveal about a company's performance?

    <p>Results of prior management decisions</p> Signup and view all the answers

    Which of the following is NOT a dimension of financial health evaluated in financial statement analysis?

    <p>Market share</p> Signup and view all the answers

    What is the primary focus of a long-term creditor, such as a bondholder, when evaluating a company's financial health?

    <p>Profitability and solvency</p> Signup and view all the answers

    What is the purpose of financial statement analysis in the context of credit evaluation?

    <p>To assess the creditworthiness of a borrower</p> Signup and view all the answers

    What is the primary purpose of financial ratio analysis in evaluating the financial performance of a firm?

    <p>To identify the financial strength and weakness of a firm</p> Signup and view all the answers

    Which type of ratio measures the company's potentiality and performance?

    <p>Growth Ratio</p> Signup and view all the answers

    What can be inferred from a low profit margin ratio?

    <p>The company has high fixed costs</p> Signup and view all the answers

    What is the purpose of analyzing various ratios in financial statement analysis?

    <p>To identify areas of improvement in the company's operations</p> Signup and view all the answers

    What does a high debt-to-equity ratio indicate about a company's capital structure?

    <p>The company has a high level of financial leverage</p> Signup and view all the answers

    What does the interest coverage ratio primarily measure?

    <p>A company's ability to generate cash to pay interest expenses</p> Signup and view all the answers

    Which of the following ratios measures the average number of days receivables are outstanding before being collected?

    <p>Receivable in Days</p> Signup and view all the answers

    What is the implication of a debt service coverage ratio that is less than one?

    <p>The company is unable to service its debt obligations</p> Signup and view all the answers

    Which of the following is an example of an activity ratio?

    <p>Receivable in Days</p> Signup and view all the answers

    What is the rule of thumb for the debt service coverage ratio?

    <p>Must be greater than one</p> Signup and view all the answers

    What is a possible implication of a positive net financing cash flow resulting from an increase in equity capital?

    <p>The firm is managing its debt-equity ratio efficiently</p> Signup and view all the answers

    Which of the following cash flow profiles would indicate a firm's need for new bank finance for capital expenditure?

    <p>Negative net operating cash flow and negative net financing cash flow</p> Signup and view all the answers

    What is a possible consequence of excessive borrowing, as indicated by a positive net financing cash flow?

    <p>Adverse impact on debt-equity ratio and debt servicing capacity</p> Signup and view all the answers

    What is a possible interpretation of a negative net financing cash flow?

    <p>The firm has repaid its existing loans or distributed dividends</p> Signup and view all the answers

    Which of the following is a key consideration for a credit analyst when evaluating a firm's cash flow profile?

    <p>All of the above</p> Signup and view all the answers

    What is the primary objective of marketing analysis in the context of a project?

    <p>To estimate the market share of the project under appraisal</p> Signup and view all the answers

    What is the key analytical tool used in industry analysis to identify the competitive forces?

    <p>Porter's five forces model</p> Signup and view all the answers

    What aspect of the market does marketing analysis focus on?

    <p>Company's external or macro-environment</p> Signup and view all the answers

    What is the main objective of industry analysis?

    <p>To identify the main sources of competitive forces</p> Signup and view all the answers

    What does marketing analysis provide information about?

    <p>Consumer behavior, intentions, attitudes, and preferences</p> Signup and view all the answers

    What is the focus of marketing analysis in the context of a project?

    <p>All of the above</p> Signup and view all the answers

    What is the primary consideration in marketing analysis?

    <p>Company's external or macro-environment</p> Signup and view all the answers

    What does marketing analysis help to identify?

    <p>The main sources of competitive forces</p> Signup and view all the answers

    What is the outcome of marketing analysis?

    <p>Estimation of the market share of the project</p> Signup and view all the answers

    What is the focus of industry analysis in the context of a project?

    <p>Identifying the main sources of competitive forces</p> Signup and view all the answers

    What is the primary objective of analyzing a firm's cash flow statement?

    <p>To analyze the firm's investment and financing activities</p> Signup and view all the answers

    What does a high Total Liability to Net Worth ratio indicate?

    <p>Higher debt financing and lower lender protection</p> Signup and view all the answers

    What is the primary focus of liquidity analysis?

    <p>Analyzing a firm's ability to meet short-term obligations</p> Signup and view all the answers

    What is the impact of a high debt ratio on a firm's financial leverage?

    <p>It increases the firm's financial leverage</p> Signup and view all the answers

    What is the primary purpose of financial ratio analysis?

    <p>To evaluate a firm's financial performance and position</p> Signup and view all the answers

    What type of cash inflow is generated from borrowing?

    <p>Financing cash inflow</p> Signup and view all the answers

    What is the purpose of adjusting for non-operating losses or gains in the cash flow statement?

    <p>To determine the cash flow from operating activities</p> Signup and view all the answers

    What is the impact of a decrease in accounts receivable on the cash flow statement?

    <p>It increases the cash flow from operating activities</p> Signup and view all the answers

    What is the primary focus of liquidity analysis?

    <p>Assessing the company's ability to pay its short-term debts</p> Signup and view all the answers

    What is the purpose of preparing a cash flow statement?

    <p>To provide information about a company's inflows and outflows of cash</p> Signup and view all the answers

    What does a negative net operating cash flow indicate?

    <p>The company has increased its inventory and account receivable</p> Signup and view all the answers

    What is the purpose of analyzing the cash flow from operating activities in a cash flow statement?

    <p>To assess the company's economic viability</p> Signup and view all the answers

    What is the cash flow from investing activities mainly used for?

    <p>To purchase new equipment</p> Signup and view all the answers

    What is the purpose of preparing a cash flow statement?

    <p>To assess the company's ability to generate cash</p> Signup and view all the answers

    What is the net cash flow from operating activities calculated by?

    <p>Adding cash sales, collection from credit sales, and subtracting payment for operating expenses and payment for purchases</p> Signup and view all the answers

    What is the purpose of Cash Flow from Financing Activities?

    <p>To identify the sources and uses of a company's funds</p> Signup and view all the answers

    What is the effect of a decrease in Long-term Loans/Bonds Payable on Cash Flow from Financing Activities?

    <p>It decreases the Cash Flow from Financing Activities</p> Signup and view all the answers

    What is the purpose of Net C/F from Operating, Investing & Financing Activities?

    <p>To determine the change in a company's cash balance</p> Signup and view all the answers

    What is the effect of an increase in Property, Plant & Equipment on Cash Flow from Investing Activities?

    <p>It decreases the Cash Flow from Investing Activities</p> Signup and view all the answers

    What is the purpose of Opening Cash & Bank Balance in the Cash Flow Statement?

    <p>To determine the company's cash balance at the beginning of the period</p> Signup and view all the answers

    What does a positive net financing cash flow indicate if it is a result of increase in equity capital?

    <p>The firm is managing its debt-equity ratio efficiently</p> Signup and view all the answers

    What is the main purpose of cash flow from investing activities?

    <p>To purchase fixed assets and investments</p> Signup and view all the answers

    What is the primary objective of analyzing a firm's cash flow statement?

    <p>To identify the firm's ability to generate cash from its operations</p> Signup and view all the answers

    What does a negative net financing cash flow indicate?

    <p>The firm has repaid its existing loans</p> Signup and view all the answers

    What type of cash inflows is included in cash flow from operations?

    <p>From sale of goods and services</p> Signup and view all the answers

    What is the focus of financial ratio analysis in the context of credit evaluation?

    <p>To analyze the firm's financial performance and position</p> Signup and view all the answers

    What is the primary focus of liquidity analysis?

    <p>Evaluating the ability of a company to pay its short-term debts</p> Signup and view all the answers

    What should a credit analyst do when evaluating a company's cash flow profile?

    <p>Analyze the cash flow from all three activities: operating, investing, and financing</p> Signup and view all the answers

    What type of cash outflows is included in cash flow from operations?

    <p>To pay suppliers for inventory</p> Signup and view all the answers

    What is the primary purpose of preparing a cash flow statement?

    <p>To provide information about a company's inflows and outflows of cash</p> Signup and view all the answers

    What is the total amount of liabilities and equity as of December 31, 2019?

    <p>Tk. 283,500</p> Signup and view all the answers

    What is the net income for the year ended December 31, 2019?

    <p>Tk. 21,000</p> Signup and view all the answers

    What is the amount of cash dividends declared and paid during the year ended December 31, 2019?

    <p>Tk. 8,500</p> Signup and view all the answers

    What is the cost of additional equipment purchased during the year ended December 31, 2019?

    <p>Tk. 60,000</p> Signup and view all the answers

    What is the amount of plant assets sold during the year ended December 31, 2019?

    <p>Tk. 62,500</p> Signup and view all the answers

    What is the total amount of assets as of December 31, 2019?

    <p>Tk. 283,500</p> Signup and view all the answers

    What is the gain on sale of plant assets during the year ended December 31, 2019?

    <p>Tk. 2,500</p> Signup and view all the answers

    What is the total amount of revenues and gains for the year ended December 31, 2019?

    <p>Tk. 602,500</p> Signup and view all the answers

    What is the depreciation expense for the year ended December 31, 2019?

    <p>Tk. 7,500</p> Signup and view all the answers

    What is the total amount of expenses for the year ended December 31, 2019?

    <p>Tk. 581,500</p> Signup and view all the answers

    What does a company's ability to generate future net cash inflows from operations help to pay?

    <p>Debts, interest, and dividends</p> Signup and view all the answers

    What is one of the reasons for differences between net income and net cash flow from operating activities?

    <p>Cash and non-cash transactions</p> Signup and view all the answers

    What is the primary categorization of activities in a statement of cash flows?

    <p>Operating, investing, and financing</p> Signup and view all the answers

    What is the purpose of analyzing a company's cash flow statement?

    <p>To determine a company's liquidity</p> Signup and view all the answers

    What is the focus of liquidity analysis in the context of financial statement analysis?

    <p>A company's liquidity</p> Signup and view all the answers

    What is the primary concern of a long-term creditor, such as a bondholder, when evaluating the financial health of a borrower?

    <p>Profitability and solvency</p> Signup and view all the answers

    What does financial statement analysis reveal about a company's past performance and current financial position?

    <p>Significant relationships between data and trends in those data</p> Signup and view all the answers

    What is the main purpose of analyzing a company's financial statements?

    <p>To obtain useful information about the company's financial health</p> Signup and view all the answers

    What is the primary focus of liquidity analysis?

    <p>A company's ability to pay its short-term debts</p> Signup and view all the answers

    What do financial statements provide information about?

    <p>A company's financial health and performance</p> Signup and view all the answers

    What is the primary objective of financial ratio analysis in evaluating the financial performance of a firm?

    <p>To assess the firm's potentiality and performance</p> Signup and view all the answers

    What type of ratio measures the company's potentiality and performance?

    <p>Growth Ratio</p> Signup and view all the answers

    What is the purpose of ratio analysis in financial statement analysis?

    <p>To identify the firm's financial strengths and weaknesses</p> Signup and view all the answers

    What is the benefit of using ratio analysis in financial statement analysis?

    <p>It provides a clear understanding of the firm's financial condition</p> Signup and view all the answers

    What can be identified through ratio analysis in financial statement analysis?

    <p>The firm's financial strengths and weaknesses</p> Signup and view all the answers

    What is the main purpose of preparing a statement of cash flows?

    <p>To assess a company's ability to generate future net cash inflows</p> Signup and view all the answers

    What is the primary focus of financial appraisal in a project?

    <p>Both commercial profitability and national profitability considerations</p> Signup and view all the answers

    What is the primary categorization of activities in a statement of cash flows?

    <p>Operating, investing, and financing activities</p> Signup and view all the answers

    What does a statement of cash flows help financial managers/bankers to identify?

    <p>A company's need for external financing</p> Signup and view all the answers

    What is the purpose of analyzing a cash flow statement?

    <p>To assess the cash flow generation of a project</p> Signup and view all the answers

    What is the primary objective of liquidity analysis?

    <p>To determine the liquidity of a project</p> Signup and view all the answers

    What is the importance of evaluating the statement of cash flows?

    <p>To evaluate a company's liquidity and solvency</p> Signup and view all the answers

    What does the statement of cash flows reveal about a company?

    <p>The company's liquidity and solvency</p> Signup and view all the answers

    What is the purpose of preparing projected financial statements?

    <p>To forecast the future financial performance of a project</p> Signup and view all the answers

    What is the primary focus of cost-volume-profit analysis?

    <p>To assess the relationship between cost, volume, and profit</p> Signup and view all the answers

    What would a credit analyst analyze to understand how efficiently a firm is managing a tradeoff between tax advantages and bankruptcy costs?

    <p>Debt Servicing Capacity</p> Signup and view all the answers

    What is a possible implication of a positive net financing cash flow resulting from an increase in equity capital?

    <p>The firm is experiencing growth opportunities</p> Signup and view all the answers

    What does a negative net financing cash flow indicate?

    <p>The firm has repaid existing loans</p> Signup and view all the answers

    What is the impact of excessive borrowing on a firm's financial health?

    <p>It increases the firm's debt-equity ratio and adversely affects its debt servicing capacity</p> Signup and view all the answers

    What should be considered in line with business strategy and growth opportunities?

    <p>Capital expenditure planning</p> Signup and view all the answers

    What type of liabilities are Term Loan classified as?

    <p>Long-term Liabilities</p> Signup and view all the answers

    What is the primary purpose of Cash Flow from Operating Activities in a Cash Flow Statement?

    <p>To show the net change in cash and cash equivalents from operating activities</p> Signup and view all the answers

    What is the classification of Office Supplies in the Balance Sheet?

    <p>Current Assets</p> Signup and view all the answers

    What is the purpose of Retained Earnings in the Balance Sheet?

    <p>To show the company's accumulated profits</p> Signup and view all the answers

    What type of analysis is used to evaluate a company's liquidity position?

    <p>Liquidity Analysis</p> Signup and view all the answers

    What is the primary focus of leverage ratios?

    <p>Evaluating a firm's financial leverage</p> Signup and view all the answers

    What does a high Total Liability to Net Worth ratio indicate?

    <p>Higher financial leverage</p> Signup and view all the answers

    What is the purpose of a cash flow statement?

    <p>To summarize a firm's cash inflows and outflows</p> Signup and view all the answers

    What is the focus of liquidity analysis?

    <p>Assessing a firm's liquidity</p> Signup and view all the answers

    What is the purpose of financial statement analysis?

    <p>To analyze a firm's financial position and performance</p> Signup and view all the answers

    What does a leverage ratio measure?

    <p>A firm's financial leverage</p> Signup and view all the answers

    What is the purpose of cash flow statement analysis?

    <p>To analyze a firm's cash inflows and outflows</p> Signup and view all the answers

    What is the focus of financial ratio analysis?

    <p>Analyzing a firm's financial position and performance</p> Signup and view all the answers

    What does a high debt ratio indicate?

    <p>Higher financial leverage</p> Signup and view all the answers

    What is the primary purpose of leverage ratios?

    <p>To measure a firm's financial leverage</p> Signup and view all the answers

    What is one of the reasons why the project failed according to the case study?

    <p>Ill motive and ill behavior of the borrower</p> Signup and view all the answers

    What was M/s Emerald Oil Industries Ltd. pioneer in doing?

    <p>Extracting edible oil from rice bran</p> Signup and view all the answers

    Why were banks not allowing the borrower to open a Back-to-Back L/C?

    <p>Due to failure of payment of overdue loans</p> Signup and view all the answers

    What is one of the factors that led to the failure of the project?

    <p>Tendency for over borrowing by exaggerating project cost</p> Signup and view all the answers

    What was the borrower's behavior described as in the case study?

    <p>Short-sighted and temporary</p> Signup and view all the answers

    What is the primary consideration for a bank when finalizing the loan structure?

    <p>The financial feasibility of the project</p> Signup and view all the answers

    What is the purpose of analyzing the financial statements of a client?

    <p>To determine the creditworthiness of the client</p> Signup and view all the answers

    What is the final stage of the borrower selection process?

    <p>Disbursement of the loan</p> Signup and view all the answers

    What is the primary focus of the bank when evaluating a client's financial statements?

    <p>The creditworthiness of the client</p> Signup and view all the answers

    What is the purpose of considering the socio-economic aspect of a project?

    <p>To assess the potential impact of the project on the environment and society</p> Signup and view all the answers

    What is the primary objective of a loan proposal?

    <p>To provide a proxy for a credit submission within the financial institution</p> Signup and view all the answers

    What should the content of a loan proposal progressively build during the preparation process?

    <p>A brief, well-argued financing case</p> Signup and view all the answers

    What questions should a loan proposal writer constantly ask themselves during the preparation process?

    <p>What, Why, and How</p> Signup and view all the answers

    What should a loan proposal provide to the lender?

    <p>A good understanding of the business or group</p> Signup and view all the answers

    What should the structure of a loan proposal contain?

    <p>Purpose of the credit, background of the business, details of the existing and proposed facilities and securities, ownership structure, management, overview of the business/project, financial analysis, debt service/repayment/security, and summary &amp; recommendations</p> Signup and view all the answers

    What is the total amount of loan sanctioned in favor of Rahman Knitting and Yarn Processing Ltd in 1992?

    <p>TK. 41.795 million</p> Signup and view all the answers

    What is the purpose of the Bangladesh Bank's direction to the bank regarding the loan account?

    <p>To recover the overdue loan</p> Signup and view all the answers

    What is the current status of the sweater unit of the project?

    <p>It is not running</p> Signup and view all the answers

    What is the borrower's reason for not being able to repay the loan installment?

    <p>Insufficient cash generation</p> Signup and view all the answers

    What was the purpose of the additional loan of TK. 45.118 million disbursed in 2004?

    <p>To balance the project properly</p> Signup and view all the answers

    What is JMI Syringes and Medical Devices Ltd. primarily known for in Bangladesh?

    <p>Manufacturing of Auto Disable (AD) Syringe</p> Signup and view all the answers

    What is the total cost of the JMI Syringes and Medical Devices Ltd. project?

    <p>BDT 500 million</p> Signup and view all the answers

    What is the status of JMI Syringes and Medical Devices Ltd. currently?

    <p>Public Limited Company</p> Signup and view all the answers

    Which of the following organizations has accredited JMI Syringes and Medical Devices Ltd.?

    <p>WHO and GVI</p> Signup and view all the answers

    Which countries does JMI Syringes and Medical Devices Ltd. export its products to?

    <p>Singapore, Thailand, Myanmar, Spain, Portugal, and other different countries of Asia and Latin America</p> Signup and view all the answers

    What is indicated by a positive net financing cash flow, if it is the result of an increase in equity capital?

    <p>Good financial health</p> Signup and view all the answers

    What does a negative net financing cash flow indicate?

    <p>Repayment of existing loans or dividend payment</p> Signup and view all the answers

    What is important for a credit analyst to understand when analyzing cash flows?

    <p>Tradeoff between Tax Advantages and bankruptcy cost from increased debt</p> Signup and view all the answers

    What should be taken into consideration regarding capital expenditure?

    <p>Consistency with business strategy and growth opportunities</p> Signup and view all the answers

    What is essential to understand in analyzing cash flows from financing activities?

    <p>Efficient management of tradeoff between Tax Advantages and bankruptcy cost</p> Signup and view all the answers

    What is the purpose of financial appraisal in a project?

    <p>To evaluate the profitability of the project</p> Signup and view all the answers

    What is the primary consideration in evaluating national or socio-economic benefits of a project?

    <p>National profitability or socio-economic benefits</p> Signup and view all the answers

    What is the purpose of cash flow statement analysis in financial appraisal?

    <p>To analyze the cash inflows and outflows of the project</p> Signup and view all the answers

    What is the focus of cost-volume-profit analysis in financial appraisal?

    <p>To analyze the relationship between cost, volume, and profit</p> Signup and view all the answers

    What is the purpose of sensitivity analysis in financial appraisal?

    <p>To analyze the impact of changes in variables on project profitability</p> Signup and view all the answers

    What is the purpose of capital budgeting techniques in financial appraisal?

    <p>To evaluate the feasibility of different investment options</p> Signup and view all the answers

    What is the focus of Working Capital Requirement assessment in financial appraisal?

    <p>To determine the working capital required to meet the project's financial obligations</p> Signup and view all the answers

    What is the purpose of assessing the cost of the project in financial appraisal?

    <p>To determine the total cost of the project, including financing costs</p> Signup and view all the answers

    What is the focus of financial projection and preparation of projected financial statements in financial appraisal?

    <p>To prepare projected financial statements to evaluate the project's financial performance</p> Signup and view all the answers

    What is the purpose of analysis of income statement and balance sheet in financial appraisal?

    <p>To analyze the financial performance of the project</p> Signup and view all the answers

    What is the primary purpose of conducting credit assessment on a group of companies?

    <p>To determine the obligor's creditworthiness</p> Signup and view all the answers

    What is the role of the RM in the credit approval process?

    <p>To recommend the loan application for approval</p> Signup and view all the answers

    What is the primary objective of the Internal Credit Risk Rating System?

    <p>To provide a granular, objective, and transparent framework for credit risk assessment</p> Signup and view all the answers

    What is the purpose of the credit risk rating derived from the ICRRS?

    <p>To assess the credit risk and make informed decisions</p> Signup and view all the answers

    What is the role of participatory banks in loan syndication?

    <p>To perform independent analysis and review of the loan terms</p> Signup and view all the answers

    What is the primary responsibility of the Recovery Unit in each bank?

    <p>To determine recovery strategy and pursue all options to maximize recovery</p> Signup and view all the answers

    Who is responsible for approving the Classified Loan Review Report for NPLs up to a certain percentage of the bank's capital?

    <p>The Head of Credit</p> Signup and view all the answers

    What is the purpose of the Classified Loan Review Report?

    <p>To review all documents and meet the customer</p> Signup and view all the answers

    What is the primary focus of the Credit Recovery Unit in managing Non-Performing Loans?

    <p>To maximize recovery and ensure timely loan loss provisioning</p> Signup and view all the answers

    What is the role of the Account Manager in the Credit Recovery Unit?

    <p>To coordinate and administer the action plan and serve as the primary customer contact</p> Signup and view all the answers

    What should be done as a last resort to recover credit from defaulted borrowers?

    <p>Taking legal action against the defaulted borrower</p> Signup and view all the answers

    What is the purpose of the Credit Risk Grading (CRG) in the credit appraisal process?

    <p>To determine the creditworthiness of the borrower</p> Signup and view all the answers

    What document is issued by the Credit Administration after credit approval?

    <p>Offer Letter</p> Signup and view all the answers

    Who is responsible for monitoring and recovering Non-Performing Loans (NPLs)?

    <p>Recovery Unit (RU)</p> Signup and view all the answers

    What is the purpose of the Internal Credit Risk Rating System (ICRRS)?

    <p>To classify loans into different risk categories</p> Signup and view all the answers

    What is the primary responsibility of the Credit Administration Department (CAD) after ensuring full compliance with the terms and conditions of approval?

    <p>To disburse the loan amount</p> Signup and view all the answers

    What is the purpose of the Loan Documentation Check List (LDCL) completed by the Relation Manager (RM)?

    <p>To document the credit approval process</p> Signup and view all the answers

    What is the primary focus of the Credit Administration Department (CAD) in relation to security documentations?

    <p>To ensure appropriate coverage in place over assets pledged as collateral</p> Signup and view all the answers

    What is the next step after the customer agrees with the terms and conditions incorporated in the offer letter?

    <p>The RM completes the Loan Documentation Check List (LDCL)</p> Signup and view all the answers

    What is the primary responsibility of the Relation Manager (RM) in the credit administration process?

    <p>To complete the Loan Documentation Check List (LDCL)</p> Signup and view all the answers

    What is the purpose of scrutinizing the loan application?

    <p>To collect all required information from different parties including Credit Information Bureau (CIB) report</p> Signup and view all the answers

    What is the significance of credit investigation?

    <p>To prevent bad credits</p> Signup and view all the answers

    What is the primary concern of the banker before sanctioning credit?

    <p>Ensuring repayment</p> Signup and view all the answers

    What is the focus of the credit process?

    <p>Selecting good borrowers</p> Signup and view all the answers

    What is the objective of credit risk management?

    <p>To minimize bad credits</p> Signup and view all the answers

    What is the primary purpose of the procedural guidelines in a bank's credit operation?

    <p>To outline the sequence of activities associated with credit operations</p> Signup and view all the answers

    What is the primary role of the Relationship Management (RM) in a bank's credit operation?

    <p>To act as a primary bank contact with a borrower</p> Signup and view all the answers

    What is the primary focus of the credit committee/CRM in a bank's credit operation?

    <p>To approve and disburse loan proposals</p> Signup and view all the answers

    What is the primary purpose of the credit budget in a bank's credit operation?

    <p>To determine the amount of credit to be sanctioned and disbursed</p> Signup and view all the answers

    What is the primary focus of the credit operations in a bank?

    <p>To start with discussion between the bank and client and end with adjustment and/or recovery of loan</p> Signup and view all the answers

    What is the primary purpose of the Credit Risk Manual given by Bangladesh Bank?

    <p>To prepare the procedural guidelines for credit operations</p> Signup and view all the answers

    What is the primary role of the head office in a bank's credit operation?

    <p>To prepare the credit budget for different areas and categories</p> Signup and view all the answers

    What is the primary purpose of the centralized credit operations in a bank?

    <p>To start with discussion between the bank and client and end with adjustment and/or recovery of loan</p> Signup and view all the answers

    What is the primary focus of the credit analysis in a bank's credit operation?

    <p>To evaluate the creditworthiness of a borrower</p> Signup and view all the answers

    What is the primary purpose of the credit appraisal exercise in a bank's credit operation?

    <p>To evaluate the creditworthiness of a borrower</p> Signup and view all the answers

    What is the primary objective of Internal Credit Risk Rating System (ICRRS)?

    <p>To assess the quality of individual borrower to help the banks to determine the quality of the credit portfolio</p> Signup and view all the answers

    Who is responsible for sanctioning/approving loans?

    <p>All of the above</p> Signup and view all the answers

    What should be used to assess the line of business generating the highest portion of the revenue and/or profit?

    <p>The sector or industry selected from the dropdown list</p> Signup and view all the answers

    What should be used if the borrower is in multiple lines of business and no particular line of business can be singled out?

    <p>&quot;Other industry- if manufacturing&quot; or &quot;other service-if service&quot;</p> Signup and view all the answers

    What is the primary function of Internal Credit Risk Rating System (ICRRS)?

    <p>To calibrate the characteristics of different sectors and industries in one single model</p> Signup and view all the answers

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