Banking Credit Management

Play an AI-generated podcast conversation about this lesson

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?

To measure the proportion of net income distributed to shareholders Signup and view all the answers

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

Higher is better Signup and view all the answers

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

To maximize profit and diversify credit portfolio Signup and view all the answers

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

The bank's current portfolio structure 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?

To formulate a plan in line with national priority Signup and view all the answers

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

Maximizing profit and diversifying credit portfolio Signup and view all the answers

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

Finding borrowers with good financial health and integrity Signup and view all the answers

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

The guidelines issued by the central bank Signup and view all the answers

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

Mobile banking and online banking platforms Signup and view all the answers

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

Dealing with all major stages of the credit cycle professionally and efficiently Signup and view all the answers

What is a recent trend in banking services?

Expanding financial services to include women entrepreneurs Signup and view all the answers

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

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

What is the primary focus of capital budgeting?

Investment decisions involving fixed assets Signup and view all the answers

What is the payback period of a project?

The length of time required to recover the original investment Signup and view all the answers

What is the purpose of capital budgeting in a firm?

To decide which projects are acceptable Signup and view all the answers

What is included in a capital budget?

Planned expenditures on fixed assets and cash flows Signup and view all the answers

How is the payback period of a project calculated?

By adding up the expected cash flows until they equal the initial investment 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?

To determine the client's creditworthiness Signup and view all the answers

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

The socio-economic aspect of the project Signup and view all the answers

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

The loan structure, price, and tenure are finalized Signup and view all the answers

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

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

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

The client becomes a borrower Signup and view all the answers

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

To evaluate the financial performance of a firm Signup and view all the answers

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

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

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

Growth ratio Signup and view all the answers

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

To evaluate the financial strength and weakness of a firm Signup and view all the answers

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

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

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

To determine the credit facility required by the customer Signup and view all the answers

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

The RM scrutinizes the submitted information and collects required data Signup and view all the answers

Why is it essential to select a good borrower?

To ensure loan repayment Signup and view all the answers

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

Because preventive measures save time and money Signup and view all the answers

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

To ensure loan repayment Signup and view all the answers

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

To evaluate the customer's creditworthiness Signup and view all the answers

Why is credit investigation essential in the loan sanctioning process?

To prevent bad credit Signup and view all the answers

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

Ensuring loan repayment Signup and view all the answers

What happens if a bank sanctions a bad credit?

It does not serve the purpose of the bank Signup and view all the answers

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

To ensure loan repayment Signup and view all the answers

Banking Credit Management

Choose a study mode

Podcast

Questions and Answers

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

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

Which of the following ratios measures the profitability of investments?

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

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

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

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

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

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

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

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

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

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

What is a recent trend in banking services?

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

What is the primary focus of capital budgeting?

What is the payback period of a project?

What is the purpose of capital budgeting in a firm?

What is included in a capital budget?

How is the payback period of a project calculated?

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

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

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

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

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

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

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

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

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

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

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

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

Why is it essential to select a good borrower?

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

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

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

Why is credit investigation essential in the loan sanctioning process?

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

What happens if a bank sanctions a bad credit?

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

More Like This

Banking Credit Management

Managing Quality Loan Portfolio

Loan Administration Process

Banking Regulations and Credit Risk Management