Questions in: Credit Analyst/ Officer

Right Answer:
I understand the importance of the probation period and am committed to my role, so I do not require any holidays or leave during this time.

Right Answer:
LTV stands for Loan-to-Value ratio, which measures the ratio of a loan to the value of the asset purchased. A higher LTV is generally considered bad because it indicates higher risk for the lender, as it means the borrower has less equity in the asset.

Right Answer:
I applied for this job because I am passionate about finance and credit analysis. I want to work with your company because of its strong reputation in the industry and commitment to excellence. I believe my skills and experience align well with the core responsibilities of this role, and I am eager to contribute to your team's success.

Right Answer:
A reverse mortgage is a loan that allows homeowners, typically older adults, to convert part of the equity in their home into cash, which they receive as a lump sum, monthly payments, or a line of credit, without having to sell their home or make monthly mortgage payments. The loan is repaid when the homeowner sells the home, moves out, or passes away.

Right Answer:
My hobbies include reading financial literature, analyzing market trends, and hiking. I also enjoy volunteering in community financial education programs.

Right Answer:
In my previous job, I worked as a Credit Analyst, where I assessed loan applications, analyzed credit reports, evaluated financial statements, and made recommendations on creditworthiness to help the bank make informed lending decisions.

Right Answer:
External factors that determine the dividend policy include:

1. Economic conditions
2. Industry trends
3. Tax policies
4. Regulatory environment
5. Market competition
6. Shareholder expectations
7. Availability of profitable investment opportunities
8. Company’s financial health and cash flow状况

Right Answer:
Commercial paper is a short-term, unsecured debt instrument issued by corporations to raise funds for working capital and other short-term financial needs, typically maturing in 1 to 270 days.

Right Answer:
Minimum subscription refers to the minimum amount of capital that a company must raise through its share offering before it can proceed with the issuance of shares and utilize the funds. The minimum subscription required for a company to utilize funds is typically specified in the company's prospectus and is usually set at 90% of the total amount of shares offered.

Right Answer:
The methods used to ascertain risk in capital budgeting decisions include:

1. Sensitivity Analysis
2. Scenario Analysis
3. Monte Carlo Simulation
4. Break-even Analysis
5. Risk-adjusted Discount Rate
6. Payback Period Analysis
7. Decision Tree Analysis

Right Answer:
A company holds cash for several reasons: to meet short-term obligations, to take advantage of investment opportunities, to maintain liquidity for operational needs, to manage unexpected expenses, and to ensure financial stability during economic fluctuations.

Right Answer:
Capital structure refers to the mix of debt and equity that a company uses to finance its operations and growth. The principles of capital structure management include:

1. **Cost of Capital**: Balancing the cost of debt and equity to minimize overall financing costs.
2. **Financial Flexibility**: Maintaining the ability to raise funds when needed without excessive risk.
3. **Risk Management**: Assessing and managing the financial risk associated with different levels of debt.
4. **Control**: Ensuring that equity financing does not dilute ownership and control of the company.
5. **Market Conditions**: Adapting the capital structure based on current market conditions and investor sentiment.

Right Answer:
Under the Companies Act, 1956, shareholders have the right to participate in a rights issue, which allows them to purchase additional shares in the company in proportion to their existing holdings, typically at a discounted price, before the shares are offered to other investors.

Right Answer:
Credit analysis is the process of evaluating a borrower's creditworthiness, which involves assessing their ability to repay loans based on their financial history, income, and other relevant factors.

Sources to determine a customer's creditworthiness include:

1. Credit reports from credit bureaus.
2. Financial statements (income statements, balance sheets).
3. Payment history with suppliers and lenders.
4. Bank statements.
5. Public records (bankruptcies, liens).
6. Personal interviews or questionnaires.

Right Answer:
1. Payment security: The importer is assured that payment will only be made once the terms of the LC are met.
2. Risk reduction: It minimizes the risk of non-delivery or substandard goods.
3. Improved cash flow: The importer can negotiate better payment terms with suppliers.
4. Access to financing: LCs can facilitate easier access to trade financing from banks.
5. Enhanced credibility: Using an LC can improve the importer's reputation with suppliers.
6. Simplified documentation: LCs provide a clear framework for required documents, making transactions smoother.

Right Answer:
The working capital cycle is the time it takes for a company to convert its current assets into cash through its operations. It measures the duration between the outlay of cash for raw material and the collection of cash from sales of finished goods.

Right Answer:
Yes, there is usually a written test as part of the selection process for a Credit Analyst/Officer position.

Right Answer:
I am looking for new challenges and opportunities for growth that align better with my career goals.

Right Answer:
Fixed assets are long-term tangible items owned by a company that are used in its operations to generate revenue, such as buildings, machinery, and equipment.