1-Which of the following statements on collateral is NOT correct?

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Collateral can be used as the main determinant of a credit decision.

Assets that are easy to value and transfer are good collateral to take.

The location of the assets needs to be considered when assessing the collateral.

Assets including land, buildings, inventory, and machinery can be used as collateral to secure debt.

2-Which of the following statements describes a Condition strength or weakness for a company in the 5 Cs of credit framework?

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The operating cash flow of the company is low.

The company has redundant assets that are not currently used in business.

The management team has a great reputation among customers and suppliers.

The risks associated with the industry are high.

3-Which of the following scenarios would NOT be considered a strength when assessing the management team as part of evaluating a companys character?

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Management has experience in the industry and financial acumen.

Management has clear communication of expectations to the team.

Management has identified clear risk mitigation strategies.

Financial reports are not widely shared and performance measures have not been identified.

4-Which of the following ratios most likely indicates strong Capacity for a company?

Review Later

Increasing accounts payables

High asset turnover ratio

Positive investing cash flows

High debt to equity ratio