T23 – 5R Strategic Consultancy Sdn Bhd

Certificate in Credit
Test 23

Name

The concept of risk management requires credit officers to

I. Take calculated risk
II. Ask a neutral third party's opinion when encountered with marginal or complete credit
III. Identify risks that can cause the credit to be vulnerable
IV. Mitigate the identified risks, meaning that some measures have been taken either by the borrower or imposed by the lender to ensure that the risks are under control

I, III and IV

I only

III and IV

I and II

None

In a partnership, liability of partners is usually

Limited to their capital contribution

Non-existent

Shared equally regardless of capital

Joint and several

None

One of the following is not the feature of a qualified title

Qualified title arise because final title cannot be issued

Qualified title does not enjoy indefeasibility due to prior claims

There should be no sub-division under qualified title

Qualified titles share the similar rights as final title

None

When taking property with title as security, one of the following is not necessary

Stamping charge documents and registering it at Land Office

Taking possession of original title deed

Obtaining the original Sales & Purchase Agreement

Ensuring that latest quit rent and assessment has been paid

None

The database that are managed by the Credit Bureau in Malaysia include

I. CCRIS
II. CTOS
III. BASIS
IV. DCHEQS

I, II, III and IV

I and IV

I, II and IV

I only

None

Which of the following is the Accounting equation?

Assets + Liabilities = Equity

Assets + Equity = Liabilities

Assets = Liabilities + Equity

Assets = Liabilities - Equity

None

Which of the following is not an accounting doctrine?

Disclosure

Matching

Materiality

Consistency

None

Which of the following can be determined only with Balance Sheet?

Funding stability

Asset Turnover

Debtors' ageing list

Return on Asset

None

Which of the following is not a source to finance the purchase of fixed assets?

Working Capital

Long term liabilities

Retained profit

Capital injections

None

Financing Gap is determined by

Stock + Debtors

Stock Turnover Period - Debtors Turnover Period + Creditors Turnover Period

Stock + Debtor - Creditor

Stock Turnover Period -I- Debtors Turnover Period - Creditors Turnover Period

None

Select the false statement regarding foreclosure proceedings

Foreclosure proceedings for registry title is commenced at the High Court

The order for sale is issued via Form 16G

The successful auction bidder is given 1 20 days to settle the auction price

Foreclosure proceedings for land office title is commenced at the Land Office

None

Which of the following areas of analysis is best considered as part of qualitative analysis?

Financial Position

Competitiveness of the industries

Collateral Valuation

Earning Capacity

None

Which of the following statement best reflect the intention Sec 270?

Every agreement made in breach of the Act is invalid

Certain parties are exempted from liability

Contract remains valid but parties may still face enforcement or penalties for non compliance

Contract in breach are automatically voidable as at customer's option

None

Which of the fundamental credit risk management principles concerns with proper structuring of the facilities to ensure loans are used for intended purposes?

Pari-Passu

Control

Appropriate tenor of financing

Protection

None

Which of the following statements are TRUE relating to solvency ratio except?

It measure the on-going ability of a borrower to generate cash flows to meet its on-going maturing obligations as a going concern

Common category of ratios are current ratio & acid test ratio

It measure the borrower’s ability to meet its short-term obligations from the liquidation of its current assets within the next 12 months

It can also be seen as the amount of quantitative protection for the current liabilities, a margin of safety to the short-term creditors

None

Which of the following is the unqualified opinion?

It states that because of limitations in the scope of the audit or because of uncertainties about the future that cannot be resolved or the effect of which cannot be estimated, the auditors cannot express an opinion

The statements present fairly the financial position and results of operations in conformity with generally accepted accounting principles consistently applied with those of the preceding period but auditors have some reservations

The statements do not present fairly the financial position or results of operations in conformity with generally accepted accounting principles

The statements present fairly the financial position and results of operations in conformity with generally accepted accounting principles consistently applied with those of the preceding period

None

The following are normally included in the notes to the accounts except

Breakdown of fixed assets by categories

Subsequent balance sheet significant events

Significant accounting policies

Provision for bad and doubtful debts

None

What does "Resident" means?

A non-citizen with permanent residency and residing in Malaysia

A non-citizen spouse of a Malaysian residing in Malaysia

A non-citizen working in Malaysia

a citizen of Malaysia

None

What is the meaning of a cross-default clause?

A shortfall in the security of one loan leads to a default in all loans

The bank can at any time declare a default on all loans

The early settlement of one loan by a borrower

A default in one loan may lead the bank to declare default on all loans

None

Which of the followings provide lead information for credit analysis?

I. CCRIS
II. CCM
III. CTOS
IV. BMC

I and IV only

I, II and III only

I and II only

All the above

None

One of the following statements is false regarding lien-holder's caveat.

A lien-holder's caveat will lapse six years after it has been lodged

A lien-holder's caveat is recognised as security as it has power for sale

A lien-holder's caveat has to be lodged with a document of title in hand

Sarawak Land Code/ Sabah Land Ordinance no provision for lien-holder caveat

None

What is the main objective of Government Investment Act 1983?

To enable Islamic Banks to comply with statutory reserve requirements

Empower government to issue government Investment Certificates on Islamic basis

Allows Islamic Banks to issue Islamic bonds

Enable government to invest in Islamic Banks

None

All of the following are steps in securing interest in property without title, except

Developer to undertake to deliver individual title

Master Chargee to undertake to deliver Memorandum of Transfer

Purchaser to deliver original Sale and Purchase agreement

Developer to be notified regarding assignment

None

Bank Negara Malaysia issues prudential standard under Sections 47-48 primary to:

Promote bank marketing activities

Control interest rates for borrowers

Regulate the employment terms of bank officers

Set rules on capital adequacy, liquidity and risk limits

None

Gearing / Leverage ratio measures

The return earned by management on the funds contributed by the ordinary shareholder

The creditworthiness of borrowers in relation to their ability to service their debt obligations

The level of indebtedness of the firm

The ability of the borrower to service its future obligations based on their current borrowings

None

Doctrine of Disclosure relates to

Full disclosure of all information in all accounting statements

Full disclosure o expenses such as depreciation and directors’ remuneration

Full disclose of the manner in which the values of the fixed assets have been determined

Full disclosure of all significant information along with their respective financial implications and significant commitment after the financial year-end

None

Which of the following is a common red flag that can be observed in the financial statement?

Increase in tangible assets

Adherence to accounting standards

Low leverage

Reserve manipulation

None

All loans shall be classified as impaired when __________

the principal or interest has been in arrears for more than 3 months

the principal and interest has been in arrears for more than 3 months

the principal and interest has been in arrears for 3 months or more

the principal or interest has been in arrears for 3 months or more

None

In the computation of ROI, EBIT is preferred over other profit measures in the numerator

to reflect the borrower’ s pricing policy, and production or purchase efficiency including supply-demand relationships, foreign exchange gains or losses in purchasing and selling of goods in different currencies and competition

to reflect the fact that the effective use of assets is not affected by the method of financing the acquisition of the assets, or by tax policies that are external to the borrower

to reflect the adequacy of the net operating profit margin and gross profit margin which are dependent on the industry in which the borrower is involved

to measure the effectiveness with which assets have been employed to make profits

None

Which of the following is the formula for Return on Equity?

EBIT / Total Assets

EBIT / Tangible Networth

(NPAT-Preference Dividends)/Average Ordinary Shareholders' Equity

(NPAT-Preference Dividends)/Total Assets

None

Identify the statements which are true

I. Deposit of title with a lending bank creates security interest
II. The advantage of the lien-holder caveat is no stamp duty payable
III. Both private and lien-holder caveat require judgment prior to foreclosure
IV. A charge over a sole-proprietor’s property for a loan to the business is considered a 3rd party charge

I and II

All the above

II only

I, II and III

None

Adjudication is the process of

attesting the signature on charge documents

assessing land value and stamp duty payable

registering a MOT

registering a charge that has been presented

None

Financial commitment of shareholders as owners in their business is measured by

I. Shareholder's funds in the business
II. Subordinated loans to the business
III. Third party collateral provided by owners
IV. Shareholders/owners have positive net worth

I, II and III only

I, II and IV only

II, III and IV only

I, III and IV only

None

Which of the following is the best description for "Collateral"?

It is not intended to provide lenders with more comfort

It is a not meant to compensate for any weakness in the other 5C's of credit

It is not a substitute for the bank's other credit requirements

It is the first way out

None

As a credit officer, which concept is important to understand whilst going through Foreign Exchange Administration (FEA) Rules and Notices?

Difference between resident and NRCC

Difference between foreign and local

Difference between Malaysian and non-Malaysian

Difference between resident and non-resident

None

Which of the following is the function commercial banks?

Influence the credit situation to Malaysia's advantage

Engage in purchase, leasing, factoring and corporate advisory activities

Finance the government through the purchase of government securities and treasury bills

Acceptance of deposits and affect the payment on behalf of government

None

A blacklist system exists primarily for

providing information leads into past track records

verifying personal data on borrowers or guarantors

enforcing prohibitions and removing rights of defaulters

determining the customer’s existing relationship with FI

None

The crystallisation of the assets under floating charge can occur under the following circumstances except for

The taking of possession of the property by the debenture holder

When the company ceases to carry on the business

When the company creates a second debenture

When the winding up of the company occurs

None

The prime objective of development finance institution is to provide _________

Medium- and long-term funds

Long-term funds

Capital expenditure financing

Short- and medium-term funds

None

In Prospective Analysis of financial statements, the following areas should be addressed except

Gearing position

Outstanding major public liability

Liquidity or cash flow position

Profitability position

None

Under CAMPARI, "Margin" refer to

Regulatory margin of financing

Profit Margins of the lender

Borrower's wealth

Percentage of financing the bank is willing to extend

None

During a loan application, which of the following is a likely window dressing measure adopted by a customer?

Capitalization of expenses

High dividend declaration

Recorded cash sales

Undervalue closing stock

None

Rescheduling involves one of the following actions

gradual increase in loan repayment

reducing interest rate to lower instalment

lengthening repayment tenure to reduce instalment

converting overdraft into term loan

None

Which is the main reason for a company to issue preferred shares

The cost is lower than ordinary shares

Fixed dividend will only be distributed if the company makes profit

It will not dilute the existing ordinary shareholder's control

It will dilute the existing ordinary shareholder's control

None

Lenders must scrutinise Memorandum and Article of Association of a corporation in order to check

I. Corporation's power to borrow
II. Corporation's Board of Directors
III. Corporation's power to charge company assets as security
IV. Corporation's paid up capital

I and III only

II and III only

I and II only

I and IV only

None

The insurance which is taken by developers is

MRTA

Endowment

Homeowners Policy

Contractors’ All Risk

None

Regulation of credit token companies will come under the purview of the following:

Company Act 1965

Payment System Act 2003

IFSA 2013

FSA 2013

None

Which of the following is the most important legislation to safeguard the interest all stakeholders in financial intermediaries

Financial Services Act (2013)

Central Bank of Malaya Ordinance

Bank Negara Malaysia

Financial Sector Master Plan

None

Which of the following is not included in the six core principles of conduct for directors, officers and employees in the banking industries?

Avoid conflict of interest

Ensure fair equitable treatment of all customers

Prevent any misuse of information

Prevent non-performing loans

None

What is the purpose of a prohibitory order?

Create a form of security over the land

Enable the bank to sell off the property

Prohibit judgment debtor from disposing of land

To give the bank interest in the land

None

Which of the following financial institutions deposits is guaranteed by government?

Bank Simpanan Nasional

Bank Kerjasama Rakyat Malaysia

Commercial Banks

Co-operative Society

None

Personal guarantee is considered redundant for which of the following types of borrowers?

I. Partnership
II. Sole proprietor
III. Office bearers of societies / clubs
IV. Shareholders of a limited company

II and IV

II and III

I and II

III and IV

None

Detailed Cash Flow Projection Method-Indirect Format starts with?

Operating Profit

Gross Profit

Opening Cash

Cost of Goods Sold

None

What is the main difference between a Code of Ethics and Code of Conduct?

A Code of Ethics applies only to customers, while a Code of Conduct applies to employee

There is no difference, they are interchangeable terms

A Code of Ethics is legally binding, while a Code of Conduct is not

A Code of Ethics is principle-based, while a Code of Conduct contains specific rules

None

Which of the following is not a management style?

Aggressive

Speculative

Conservative

Extravagant

None

Effective 9 October 1995, the guidelines for accepting guarantees are attended to achieve the following objective except __________

to have resources against the borrower first

to ensure guarantors are made aware of his liabilities

to keep guarantors informed of the latest status of the loans guaranteed

to protect the guarantors against legal action

None

Which of the following is NOT the principal objectives of Bank Negara Malaysia?

To lay down policies intended to promote sound monetary stability and strong financial structure to enhance economic growth in Malaysia

To act as banker to commercial banks and other financial institutions

To be the sole issuing and distributing authority of the currency in Malaysia

To issue guidelines, regulations and directives

None

Which of the following is NOT one of the fundamental credit principles?

Principle of Pari-Passu

Quality of credit is more important than exploiting new opportunities

Principle of Risk taking

Good first way out

None

Prior to 1986. housing loans were not extended for more than 10 years. Currently tenors can be extended to 25 years. This is possible due to the __________

Steady growth in housing industry

Bank excess liquidity

Competitive pressure in the banking industry

Establishment of Cagamas Berhad

None

Frequent extension on the maturity of the trade bills may indicate

Increase in the trade creditors' period

Increase in the trade debtors' period

Increase in sales

Decrease in sales

None

Under Section 134, which of the following is a permitted disclosure?

Disclosure to a competitor bank for benchmarking

Disclosure to a media outlets

Sharing customer details with other borrowers

Disclosure for purpose of criminal investigation by an authorized officer

None

Which is the most dominant general insurance in Malaysia?

Motor

Fire

Marin, aviation and transit (MAT)

Properties

None

Which of the following is correct sequence of a credit process?

Defining a written report, analysis credit risk and structuring for approval, documentation, monitoring and recovery

Target market, verification, evaluation and approval

Origination, verification, evaluation, approval, monitoring, collection and recovery

Origination, approval and administration

None

What is the main objective of the Credit Guarantee Corporation Malaysia Berhad?

To help Bumiputra gain access to credit facilities from financial institutions

To assist small and medium scale enterprises to gain access to credit facilitation from financial institutions

To guarantee small scale enterprises to gain access to credit facilities from financial institutions

To guarantee working capital loan extended by financial institution to small scale enterprises

None

When stock period increases and trade creditors’ period decreases, what happens to the financing gap?

Will decrease

Will increase

Remain unchanged

Cannot be determined

None

This group of ratio deals with the profitability of the day to day business of the borrower. A sub -category ratio in this group of ratio is

Return on Asset

PER

Earning Per Share

Return on Equity

None

In preparing for CCR exam, the best strategy include

Leaving all hard questions for last 5 minutes

Skipping long case studies

Understanding concepts, practicing MCQs and managing time

Memorising questions without understanding

None

What is the main purpose of BNM "Fit and Proper Criteria" for directors and key responsible persons in financial institutions?

To promote shareholder activism

To ensure individuals are competent, honest, and act with integrity

To determine their salary packages

To reduce staff turnover

None

The formula for Average Stock Turnover Period is

Average Stock Balance ÷ COGS x 365 days

Average Trade Creditors ÷ Purchase x 365 days

Trade Debtors ÷ Sales x 365 days

Average Trade Debtors ÷ Credit Sales x 365 days

None

Which of the following is a profitability ratio in relation to investment?

Returns on Equity

Net Operating Profit Margin

Returns on Investment

Returns on Assets

None

The first commercial bank established in Malaysia was __________

Chartered Mercantile Bank of India, London and China

The Chartered Bank, Penang

Kwong Yik (Selangor) Banking Corporation

Mercantile Bank Penang

None

Which of the following would most likely be included in a Code of Practice issued by Bank Negara Malaysia?

Technical procedure for responsible credit assessment and risk management

Ethical principles such as integrity and honesty

Guidelines on punctuality and dress code for employee

Steps for resolving conflict between co-workers

None

In law, a natural person refers to

Company

Society

Individual human being

Partnership

None

The following are forms of capital reserve EXCEPT

Capital redemption reserve funds

Bonus shares issue

Assets revaluation

Share premiums

None

Which of the following are recognised as keepers liquidity?

Discount houses

FSA Inter-bank market

Money markets

Money brokers

None

One of the main aspects of the Development Finance Institution Acts 2002 (DFIA) is __________

to ensure safe and sound financial management of the DFIs

to provide a comprehensive regulatory and supervisory framework of the DFIs

to ensure the DFIs roles, objective and activities are consistent with national objectives and these mandated roles are effectively and efficiently implemented

soundness and stability of the manufacturing and agricultural sectors

None

In the event of delay in making a bankruptcy search, a lender may require

a statutory declaration that the borrower is not a bankrupt

an indemnity from the lawyer conducting the search

an additional guarantor be obtained until the search is done

fixed deposit equivalent to the loan amount be pledged

None

Company uses cash to prepay long term bond. The effect on current ratio and assets turnover ratio are?

Current Ratio: Decrease, Asset Turnover: Decrease

Current Ratio: Increase, Asset Turnover: Decrease

Current Ratio: Increase, Asset Turnover: Increase

Current Ratio: Decrease, Asset Turnover: Increase

None

In providing the company's direction and strategic plan, the lender must determine

I. Character of the management team
II. Track record
III. Capability of the management team
IV. Size of the management team

l and IV

I and II

I and III

All of the above

None

Which of the following is/are true about accessing “Character" for consumer lending?

I. Borrower's age
II. Marital status
III. Occupations
IV. Income pattern

I, II and III

I and II

II and III

All the above

None

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