Banking Credit Management
40 Questions
3 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary purpose of the Gross Margin ratio in profitability analysis?

  • To determine the income or operating success of an enterprise for a given period of time (correct)
  • To evaluate the profitability of investments
  • To measure the operating success of an enterprise
  • To assess the earning power on shareholders' equity

    • What is the rule of thumb for the SG&A ratio in profitability analysis?

  • Higher is better
  • Between 20% to 25% is better
  • Between 25% to 30% is better
  • Lower is better (correct)

    • Which of the following ratios measures the profitability of investments?

  • Return on Equity
  • Return on Assets (correct)
  • Gross Margin
  • Operating Profit Margin

    • What is the purpose of the Dividend Payout Rate ratio in profitability analysis?

    <p>To measure the proportion of net income distributed to shareholders</p> Signup and view all the answers

    What is the general guideline for the Operating Profit Margin ratio in profitability analysis?

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

    What is the primary objective of credit planning at the bank level?

    <p>To maximize profit and diversify credit portfolio</p> Signup and view all the answers

    What is a key factor to consider when formulating a bank's credit plan?

    <p>The bank's current portfolio structure</p> Signup and view all the answers

    What is the purpose of considering the government's priorities in the 5-year plan when formulating a bank's credit plan?

    <p>To formulate a plan in line with national priority</p> Signup and view all the answers

    What is a benefit of credit planning at the bank level?

    <p>Maximizing profit and diversifying credit portfolio</p> Signup and view all the answers

    What is the primary challenge for a bank in disbursing quality loans?

    <p>Finding borrowers with good financial health and integrity</p> Signup and view all the answers

    What is a key consideration when allocating funds amongst various alternative uses?

    <p>The guidelines issued by the central bank</p> Signup and view all the answers

    What has changed the banking business environment and given it a new shape?

    <p>Mobile banking and online banking platforms</p> Signup and view all the answers

    What is a key aspect of managing a quality loan portfolio?

    <p>Dealing with all major stages of the credit cycle professionally and efficiently</p> Signup and view all the answers

    What is a recent trend in banking services?

    <p>Expanding financial services to include women entrepreneurs</p> Signup and view all the answers

    What is a result of the changed business environment in banking?

    <p>Banks are introducing new financial products to meet business requirements</p> Signup and view all the answers

    What is the primary focus of capital budgeting?

    <p>Investment decisions involving fixed assets</p> Signup and view all the answers

    What is the payback period of a project?

    <p>The length of time required to recover the original investment</p> Signup and view all the answers

    What is the purpose of capital budgeting in a firm?

    <p>To decide which projects are acceptable</p> Signup and view all the answers

    What is included in a capital budget?

    <p>Planned expenditures on fixed assets and cash flows</p> Signup and view all the answers

    How is the payback period of a project calculated?

    <p>By adding up the expected cash flows until they equal the initial investment</p> Signup and view all the answers

    What is the primary purpose of a bank's financial analysis of a client's historical and projected data?

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

    What is a critical factor for a bank to consider when finalizing a loan structure?

    <p>The socio-economic aspect of the project</p> Signup and view all the answers

    What is the outcome if a bank finds a client's financial analysis to be satisfactory?

    <p>The loan structure, price, and tenure are finalized</p> Signup and view all the answers

    What is the role of a bank's lending target in the industry?

    <p>To guide the bank's credit planning and allocation of funds</p> Signup and view all the answers

    What happens if a bank's documentation and disbursement process is complete?

    <p>The client becomes a borrower</p> Signup and view all the answers

    What is the primary function of ratio analysis in financial statements?

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

    What is a key benefit of using ratio analysis in financial statement analysis?

    <p>It helps to identify the financial strengths and weaknesses of a firm</p> Signup and view all the answers

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

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

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

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

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

    <p>It helps to identify the financial strengths and weaknesses of a firm</p> Signup and view all the answers

    What is the primary objective of the discussion between the banker and the customer?

    <p>To determine the credit facility required by the customer</p> Signup and view all the answers

    What happens after the customer applies for credit in the prescribed format?

    <p>The RM scrutinizes the submitted information and collects required data</p> Signup and view all the answers

    Why is it essential to select a good borrower?

    <p>To ensure loan repayment</p> Signup and view all the answers

    Why do banks prioritize preventive measures over curative measures in credit investigation?

    <p>Because preventive measures save time and money</p> Signup and view all the answers

    What is the ultimate goal of a banker when sanctioning credit?

    <p>To ensure loan repayment</p> Signup and view all the answers

    What is the purpose of collecting information from the Credit Information Bureau (CIB) report?

    <p>To evaluate the customer's creditworthiness</p> Signup and view all the answers

    Why is credit investigation essential in the loan sanctioning process?

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

    What is the banker's primary concern when evaluating a loan application?

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

    What happens if a bank sanctions a bad credit?

    <p>It does not serve the purpose of the bank</p> Signup and view all the answers

    Why is the selection of a good borrower crucial in the loan sanctioning process?

    <p>To ensure loan repayment</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser