40 Questions
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
What is the rule of thumb for the SG&A ratio in profitability analysis?
Lower is better
Which of the following ratios measures the profitability of investments?
Return on Assets
What is the purpose of the Dividend Payout Rate ratio in profitability analysis?
To measure the proportion of net income distributed to shareholders
What is the general guideline for the Operating Profit Margin ratio in profitability analysis?
Higher is better
What is the primary objective of credit planning at the bank level?
To maximize profit and diversify credit portfolio
What is a key factor to consider when formulating a bank's credit plan?
The bank's current portfolio structure
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
What is a benefit of credit planning at the bank level?
Maximizing profit and diversifying credit portfolio
What is the primary challenge for a bank in disbursing quality loans?
Finding borrowers with good financial health and integrity
What is a key consideration when allocating funds amongst various alternative uses?
The guidelines issued by the central bank
What has changed the banking business environment and given it a new shape?
Mobile banking and online banking platforms
What is a key aspect of managing a quality loan portfolio?
Dealing with all major stages of the credit cycle professionally and efficiently
What is a recent trend in banking services?
Expanding financial services to include women entrepreneurs
What is a result of the changed business environment in banking?
Banks are introducing new financial products to meet business requirements
What is the primary focus of capital budgeting?
Investment decisions involving fixed assets
What is the payback period of a project?
The length of time required to recover the original investment
What is the purpose of capital budgeting in a firm?
To decide which projects are acceptable
What is included in a capital budget?
Planned expenditures on fixed assets and cash flows
How is the payback period of a project calculated?
By adding up the expected cash flows until they equal the initial investment
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
What is a critical factor for a bank to consider when finalizing a loan structure?
The socio-economic aspect of the project
What is the outcome if a bank finds a client's financial analysis to be satisfactory?
The loan structure, price, and tenure are finalized
What is the role of a bank's lending target in the industry?
To guide the bank's credit planning and allocation of funds
What happens if a bank's documentation and disbursement process is complete?
The client becomes a borrower
What is the primary function of ratio analysis in financial statements?
To evaluate the financial performance of a firm
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
What type of ratio measures a company's potentiality and performance?
Growth ratio
What is the purpose of ratio analysis in evaluating a firm's financial performance?
To evaluate the financial strength and weakness of a firm
What is the advantage of using ratio analysis in financial statement analysis?
It helps to identify the financial strengths and weaknesses of a firm
What is the primary objective of the discussion between the banker and the customer?
To determine the credit facility required by the customer
What happens after the customer applies for credit in the prescribed format?
The RM scrutinizes the submitted information and collects required data
Why is it essential to select a good borrower?
To ensure loan repayment
Why do banks prioritize preventive measures over curative measures in credit investigation?
Because preventive measures save time and money
What is the ultimate goal of a banker when sanctioning credit?
To ensure loan repayment
What is the purpose of collecting information from the Credit Information Bureau (CIB) report?
To evaluate the customer's creditworthiness
Why is credit investigation essential in the loan sanctioning process?
To prevent bad credit
What is the banker's primary concern when evaluating a loan application?
Ensuring loan repayment
What happens if a bank sanctions a bad credit?
It does not serve the purpose of the bank
Why is the selection of a good borrower crucial in the loan sanctioning process?
To ensure loan repayment
Learn about the importance of managing a quality loan portfolio in a competitive banking environment. Understand the key stages of the credit cycle and how to maintain a strong credit culture in a bank. Covers loan initiation, credit assessment, administration, monitoring, and recovery procedures.
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