Managing Quality Loan Portfolio

What is the general rule of thumb for Gross Margin, Composite?

Equals to 50%
Higher is better (correct)
Lower is better
Equals to 1%

What does the Return on Assets ratio measure?

The profitability of investments (correct)
Earning power on shareholders' equity
The operating success of an enterprise
The income or operating success of an enterprise

What is the general rule of thumb for SG & A, %?

Higher is better
Equals to 50%
Equals to 1%
Lower is better (correct)

What does the Return on Equity ratio measure?

Earning power on shareholders' equity (B) Signup and view all the answers

What is the general rule of thumb for Operating Profit Margin?

Higher is better (A) Signup and view all the answers

What is the resulting impact of new banks' entry in the credit market?

Increased competition (D) Signup and view all the answers

What is the major challenge for a bank to disburse quality loans?

Selecting good/right borrowers (C) Signup and view all the answers

What is the focus of banks in recent times?

Expanding financial services (B) Signup and view all the answers

What has changed the banking business environment?

Mobile banking and online banking platform (B) Signup and view all the answers

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

Managing loan initiation, credit assessment, and credit administration (D) Signup and view all the answers

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

To maximize profit (B) Signup and view all the answers

What is one of the key factors to consider when making a bank-level credit plan?

Government priority set in the 5-year plan (A) Signup and view all the answers

What is the ultimate goal of allocating loanable funds amongst various alternatives uses?

To ensure best alternative use of funds (A) Signup and view all the answers

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 (D) Signup and view all the answers

What is the purpose of prudential regulations in credit planning?

To ensure banks operate within regulatory limits (D) Signup and view all the answers

What is capital budgeting referring to?

The investment decision involving fixed assets of a firm (A) Signup and view all the answers

What does the term 'capital' refer to in capital budgeting?

Fixed assets used in production (D) Signup and view all the answers

What is the payback period defined as?

The length of time to recover the original investment (A) Signup and view all the answers

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 (D) Signup and view all the answers

What is the main purpose of capital budgeting techniques?

To analyze and decide which projects are acceptable (D) Signup and view all the answers

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

To evaluate operating and financial performance of a firm (C) Signup and view all the answers

What does a ratio express in financial statement data?

The mathematical relationship between two figures (A) Signup and view all the answers

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

Growth Ratio (D) Signup and view all the answers

Why is ratio analysis necessary in financial statement analysis?

To understand the actual financial condition of a firm (D) Signup and view all the answers

What is the benefit of using ratio analysis to evaluate financial performance?

It helps to evaluate the actual financial condition of a firm (B) Signup and view all the answers

What is the primary goal of a bank when sanctioning credit?

To ensure good credit (A) Signup and view all the answers

Why does a bank prefer preventive measures over curative measures?

Because preventive measures are cheaper (B) Signup and view all the answers

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 (C) Signup and view all the answers

What is the purpose of a credit investigation?

To select good borrowers (B) Signup and view all the answers

Why is it important for a bank to select good borrowers?

To minimize bad debts (C) Signup and view all the answers

What is the outcome of a successful discussion between a banker and a customer?

The customer applies for credit in a prescribed format (A) Signup and view all the answers

What is the role of a Credit Information Bureau (CIB) report in the credit process?

To collect credit information from different parties (D) Signup and view all the answers

Why is it better for a bank not to sanction any credit rather than sanctioning a bad credit?

Because it minimizes bad debts (A) Signup and view all the answers

What is the purpose of a banker's credit investigation?

To ensure loan repayment (D) Signup and view all the answers

What is the first step in the credit process?

The banker and the customer discuss credit facilities (A) Signup and view all the answers

What is the purpose of applying different techniques on the financial statements of the client?

To assess the financial feasibility of the project (B) Signup and view all the answers

What is considered by the bank before finalizing the loan terms?

Both the financial feasibility and socio-economic aspect of the project (C) Signup and view all the answers

What happens if the bank finds the applicant's aspects satisfactory?

The bank initiates the documentation and disbursement process (D) Signup and view all the answers

What is the purpose of financial analysis based on projected data?

To assess the financial feasibility of the project (D) Signup and view all the answers

What is the final step in the loan application process?

Loan disbursal (C) Signup and view all the answers