40 Questions
What is the general rule of thumb for Gross Margin, Composite?
Higher is better
What does the Return on Assets ratio measure?
The profitability of investments
What is the general rule of thumb for SG & A, %?
Lower is better
What does the Return on Equity ratio measure?
Earning power on shareholders' equity
What is the general rule of thumb for Operating Profit Margin?
Higher is better
What is the resulting impact of new banks' entry in the credit market?
Increased competition
What is the major challenge for a bank to disburse quality loans?
Selecting good/right borrowers
What is the focus of banks in recent times?
Expanding financial services
What has changed the banking business environment?
Mobile banking and online banking platform
What is a key aspect of managing a quality loan portfolio?
Managing loan initiation, credit assessment, and credit administration
What is the main objective of credit planning at the bank level?
To maximize profit
What is one of the key factors to consider when making a bank-level credit plan?
Government priority set in the 5-year plan
What is the ultimate goal of allocating loanable funds amongst various alternatives uses?
To ensure best alternative use of funds
What is the benefit of considering national level credit growth targets in credit planning?
It helps in formulating a plan in line with national priority
What is the purpose of prudential regulations in credit planning?
To ensure banks operate within regulatory limits
What is capital budgeting referring to?
The investment decision involving fixed assets of a firm
What does the term 'capital' refer to in capital budgeting?
Fixed assets used in production
What is the payback period defined as?
The length of time to recover the original investment
How is the payback period computed?
By adding up the expected cash flows for each year until the cumulative value is equal to the total amount initially invested
What is the main purpose of capital budgeting techniques?
To analyze and decide which projects are acceptable
What is the primary purpose of ratio analysis in financial statements?
To evaluate operating and financial performance of a firm
What does a ratio express in financial statement data?
The mathematical relationship between two figures
What type of ratio measures a company's potentiality and performance?
Growth Ratio
Why is ratio analysis necessary in financial statement analysis?
To understand the actual financial condition of a firm
What is the benefit of using ratio analysis to evaluate financial performance?
It helps to evaluate the actual financial condition of a firm
What is the primary goal of a bank when sanctioning credit?
To ensure good credit
Why does a bank prefer preventive measures over curative measures?
Because preventive measures are cheaper
What is the role of a Relationship Manager (RM) in the credit process?
To ensure that the proposed credit is from the expected business segment/sector
What is the purpose of a credit investigation?
To select good borrowers
Why is it important for a bank to select good borrowers?
To minimize bad debts
What is the outcome of a successful discussion between a banker and a customer?
The customer applies for credit in a prescribed format
What is the role of a Credit Information Bureau (CIB) report in the credit process?
To collect credit information from different parties
Why is it better for a bank not to sanction any credit rather than sanctioning a bad credit?
Because it minimizes bad debts
What is the purpose of a banker's credit investigation?
To ensure loan repayment
What is the first step in the credit process?
The banker and the customer discuss credit facilities
What is the purpose of applying different techniques on the financial statements of the client?
To assess the financial feasibility of the project
What is considered by the bank before finalizing the loan terms?
Both the financial feasibility and socio-economic aspect of the project
What happens if the bank finds the applicant's aspects satisfactory?
The bank initiates the documentation and disbursement process
What is the purpose of financial analysis based on projected data?
To assess the financial feasibility of the project
What is the final step in the loan application process?
Loan disbursal
Learn about the key stages involved in managing a quality loan portfolio, including loan initiation, credit assessment, and recovery procedures. Understand the importance of a strong credit culture in a competitive banking environment.
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