1. Which of the following is considered an external factor for the automotive industry?

Hint: Factors for industry analysis are based on how they affect the borrower's industry, not just the borrower.

a. Stricter emission regulations are implemented for automobile manufacturers.

b. Technological advancements are discovered, changing vehicle designs.

c. Manufacturing employees begin a protest and stop working.

d. Global economic experts predict an upcoming recession.

2. Which of the following is TRUE regarding management analysis?

a. A credit analyst should provide the same amount of detail for a low-risk borrower as a high-risk borrower in the management analysis.

b. Management analysis is more important when dealing with a high-risk borrower than a low-risk borrower.

c. The reputation of the management team should be evaluated by interviewing employees of the company.

d. A risk averse management team is preferred when evaluating the creditworthiness of a company.

3. What factors should you pay attention to when evaluating a companys financial standing?

a. Cash flow and debt service coverage, profitability, credit rating, growth

b. Growth, balance sheet health, cash flow and debt service coverage, debt structure

c. Profitability, operational performance, balance sheet health, cash flow, and debt service coverage

d. Profitability, interest-bearing debt, solvency, capital structure

4. Which of the following statements is TRUE regarding loan security?

a. An analyst should aim to secure a loan with one of each type of loan security.

b. Financial institutions should always approve loans if the value of the security can cover the value of the loan.

c. It is unnecessary to take security if the company has a good history with the financial institution.

d. Loan security protects the lenders claim against unforeseen and unfavorable events.