40 Questions
What has changed the banking business environment and given it a new shape?
Mobile banking and online banking platform
What is a major challenge for a bank in disbursing quality loans?
Selecting good/right borrowers
What is a recent trend in the banking industry?
Expansion of financial services
What is a key aspect of a strong credit culture in a bank?
Professional and efficient management of all stages of the credit cycle
What is a consequence of new banks entering the credit market?
Fuelled competition among banks
What is the primary focus of capital budgeting in a firm?
Planning expenditures on assets with cash flows beyond one year
What does the term 'capital' refer to in the context of capital budgeting?
Fixed assets used in production
What is the primary objective of credit planning at the bank level?
Maximizing profit and diversifying credit portfolio
What is the Payback Period (PBP) in capital budgeting?
The length of time required to recover the original investment
What is a key factor to consider when formulating a bank's credit plan?
Government priority set in the 5-year plan
What is the purpose of computing a project's payback period?
To decide whether to accept or reject a project
What is one of the benefits of credit planning at the bank level?
Ensuring the best alternative use of funds
What is the key characteristic of capital budgeting?
Long-term focus on cash flows beyond one year
What is the role of prudential regulations in credit planning at the bank level?
To guide the allocation of loanable funds
What is the ultimate goal of credit planning at the bank level?
To provide credit to the right person at the right time
What is the primary purpose of a bank's financial analysis on a client's historical and projected data?
To assess the financial feasibility of the project
What happens if the bank finds the financial analysis of a client's projected data to be unsatisfactory?
The loan application is rejected
Why is it important for a bank to consider the socio-economic aspect of a project?
To ensure the project is socially and environmentally responsible
What is the final step in the borrower selection process if all aspects of the applicant are satisfactory?
Disbursement of loan
What is the purpose of a loan structure?
To finalize the terms and conditions of the loan
What is the implication of a higher Gross Margin ratio?
Higher profitability
What does a lower SG&A percentage indicate?
Lower operating expenses
What is the implication of a higher Return on Assets ratio?
Higher profitability of investments
What is the implication of a lower Dividend Payout Rate?
Lower dividend payments to shareholders
What does a higher Net Margin ratio indicate?
Higher profitability
What is the primary objective of the discussion between the banker and the customer regarding credit facilities?
To ensure the proposed credit is from an expected business segment/sector
What is the significance of the Credit Information Bureau (CIB) report in the credit application process?
It provides additional information about the customer's credit history
What is the primary focus of the bank when sanctioning credit?
To ensure the borrower's creditworthiness
What is the difference between preventive and curative measures in credit investigation?
Preventive measures are less expensive, while curative measures are more costly
Why is the selection of a good borrower crucial for the bank?
To minimize the risk of default
What is the primary responsibility of the Relationship Manager (RM) during the credit application process?
To ensure the proposed credit is from an expected business segment/sector
What is the purpose of the prescribed format provided by the bank for credit applications?
To ensure all necessary information is collected
Why is it essential for the bank to ensure the repayment of the loan?
To minimize the risk of default
What is the significance of credit investigation in the credit application process?
It is a preventive measure to ensure the selection of good borrowers
What is the primary goal of the bank when sanctioning credit?
To ensure the repayment of the loan
What is the primary purpose of ratio analysis in financial statements?
To evaluate operating and financial performance of a firm
What is the main advantage of using ratio analysis to evaluate a firm's financial performance?
It allows for comparison of financial performance over time
What is an example of a growth ratio, according to Financial Spread Sheet (FSS)?
Growth ratios measure the company’s potentiality, performance
What is the benefit of using ratio analysis to evaluate a firm's financial performance?
It helps to understand the actual financial condition of a firm
What is the relationship expressed by a ratio in financial analysis?
The mathematical relationship between two figures
Test your knowledge of credit management in banking, including loan initiation, credit assessment, administration, and recovery procedures. Learn how to maintain a strong credit culture in a competitive banking environment.
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