CBP Financial Analysis & Credit Management

Question 1

What is the purpose of financial ratio analysis in credit assessment?

Accepted Answer

To assess creditworthiness

Answer

Financial ratio analysis helps evaluate a borrower's ability to repay by analyzing liquidity, solvency, and profitability.

Question 2

Which of the following is a key component of a credit report?

Accepted Answer

Credit history and repayment record

Answer

A credit report includes the borrower’s credit history, outstanding debts, and payment behavior to assess risk.

Question 3

What does the debt-to-equity ratio measure?

Accepted Answer

Financial leverage

Answer

The debt-to-equity ratio compares a company's total liabilities to its shareholders' equity, indicating financial leverage.

Question 4

What is the role of collateral in credit management?

Accepted Answer

To secure the loan against default

Answer

Collateral serves as security for a loan, reducing the lender’s risk in case of borrower default.

Question 5

Which financial statement shows a company’s financial position at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet reflects a company’s assets, liabilities, and equity at a specific date.

(CBP) Certified Banking Professional Practice Test