Certificate in Credit T23 – 5R Strategic Consultancy Sdn Bhd

Name

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

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

Common category of ratios are current ratio & acid test ratio

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

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

an indemnity from the lawyer conducting the search

a statutory declaration that the borrower is not a bankrupt

fixed deposit equivalent to the loan amount be pledged

an additional guarantor be obtained until the search is done

None

Doctrine of Disclosure relates to

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

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 information in all accounting statements

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 III

III and IV

I and II

II and IV

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

Prevent any misuse of information

Prevent non-performing loans

Ensure fair equitable treatment of all customers

None

What is the meaning of a cross-default clause?

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

The early settlement of one loan by a borrower

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

None

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

Increase in tangible assets

Reserve manipulation

Adherence to accounting standards

Low leverage

None

Which is the most dominant general insurance in Malaysia?

Motor

Marin, aviation and transit (MAT)

Properties

Fire

None

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

To determine their salary packages

To promote shareholder activism

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

To reduce staff turnover

None

Which of the following is the function commercial banks?

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

Influence the credit situation to Malaysia's advantage

None

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

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

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

None

Select the false statement regarding foreclosure proceedings

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

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 registry title is commenced at the High Court

None

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

Difference between foreign and local

Difference between Malaysian and non-Malaysian

Difference between resident and non-resident

Difference between resident and NRCC

None

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

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

I, II and IV

I, II, III and IV

I and IV

I only

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

II, III and IV only

I, II and III only

I, III and IV only

I, II and IV only

None

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

Asset Turnover

Return on Asset

Funding stability

Debtors' ageing list

None

What is the main objective of Government Investment Act 1983?

Empower government to issue government Investment Certificates on Islamic basis

To enable Islamic Banks to comply with statutory reserve requirements

Allows Islamic Banks to issue Islamic bonds

Enable government to invest in Islamic Banks

None

The first commercial bank established in Malaysia was __________

The Chartered Bank, Penang

Chartered Mercantile Bank of India, London and China

Mercantile Bank Penang

Kwong Yik (Selangor) Banking Corporation

None

Which of the following is the Accounting equation?

Assets = Liabilities + Equity

Assets + Liabilities = Equity

Assets = Liabilities - Equity

Assets + Equity = Liabilities

None

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

Returns on Investment

Net Operating Profit Margin

Returns on Assets

Returns on Equity

None

The insurance which is taken by developers is

Endowment

Contractors’ All Risk

MRTA

Homeowners Policy

None

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

Obtaining the original Sales & Purchase Agreement

Ensuring that latest quit rent and assessment has been paid

Taking possession of original title deed

Stamping charge documents and registering it at Land Office

None

The formula for Average Stock Turnover Period is

Average Trade Debtors ÷ Credit Sales x 365 days

Trade Debtors ÷ Sales x 365 days

Average Trade Creditors ÷ Purchase x 365 days

Average Stock Balance ÷ COGS x 365 days

None

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

Collateral Valuation

Financial Position

Earning Capacity

Competitiveness of the industries

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

I and IV only

II and III only

I and II only

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

Return on Equity

Earning Per Share

PER

None

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

EBIT / Tangible Networth

(NPAT-Preference Dividends)/Total Assets

EBIT / Total Assets

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

None

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

When the company creates a second debenture

When the winding up of the company occurs

The taking of possession of the property by the debenture holder

When the company ceases to carry on the business

None

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

Current Ratio: Increase, Asset Turnover: Decrease

Current Ratio: Increase, Asset Turnover: Increase

Current Ratio: Decrease, Asset Turnover: Increase

Current Ratio: Decrease, Asset Turnover: Decrease

None

In a partnership, liability of partners is usually

Shared equally regardless of capital

Joint and several

Non-existent

Limited to their capital contribution

None

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

Co-operative Society

Commercial Banks

Bank Kerjasama Rakyat Malaysia

Bank Simpanan Nasional

None

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

Control

Protection

Appropriate tenor of financing

Pari-Passu

None

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

There should be no sub-division under qualified title

Qualified title does not enjoy indefeasibility due to prior claims

Qualified title arise because final title cannot be issued

Qualified titles share the similar rights as final title

None

Frequent extension on the maturity of the trade bills may indicate

Decrease in sales

Increase in the trade creditors' period

Increase in sales

Increase in the trade debtors' period

None

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

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

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

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

What does "Resident" means?

A non-citizen working in Malaysia

a citizen of Malaysia

A non-citizen with permanent residency and residing in Malaysia

A non-citizen spouse of a Malaysian residing in Malaysia

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 protect the guarantors against legal action

to ensure guarantors are made aware of his liabilities

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

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

All of the above

I and II

I and III

l and IV

None

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

Will increase

Cannot be determined

Will decrease

Remain unchanged

None

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

It is not intended to provide lenders with more comfort

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

It is the first way out

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

None

In law, a natural person refers to

Society

Individual human being

Partnership

Company

None

Which of the following is not an accounting doctrine?

Matching

Materiality

Consistency

Disclosure

None

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

Purchaser to deliver original Sale and Purchase agreement

Master Chargee to undertake to deliver Memorandum of Transfer

Developer to undertake to deliver individual title

Developer to be notified regarding assignment

None

Which of the followings provide lead information for credit analysis?

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

I, II and III only

I and II only

All the above

I and IV only

None

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

Financial Services Act (2013)

Bank Negara Malaysia

Financial Sector Master Plan

Central Bank of Malaya Ordinance

None

What is the purpose of a prohibitory order?

To give the bank interest in the land

Create a form of security over the land

Prohibit judgment debtor from disposing of land

Enable the bank to sell off the property

None

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

Capitalization of expenses

Undervalue closing stock

Recorded cash sales

High dividend declaration

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

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

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

None

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

Subsequent balance sheet significant events

Significant accounting policies

Provision for bad and doubtful debts

Breakdown of fixed assets by categories

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

Guidelines on punctuality and dress code for employee

Ethical principles such as integrity and honesty

Steps for resolving conflict between co-workers

None

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

Principle of Pari-Passu

Principle of Risk taking

Quality of credit is more important than exploiting new opportunities

Good first way out

None

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

Outstanding major public liability

Gearing position

Liquidity or cash flow position

Profitability position

None

All loans shall be classified as impaired when __________

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

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

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

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

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 __________

Bank excess liquidity

Establishment of Cagamas Berhad

Steady growth in housing industry

Competitive pressure in the banking industry

None

Which of the following is the unqualified opinion?

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 but auditors have some reservations

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

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

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

II only

All the above

I, II and III

None

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

Disclosure to a media outlets

Disclosure for purpose of criminal investigation by an authorized officer

Sharing customer details with other borrowers

Disclosure to a competitor bank for benchmarking

None

In preparing for CCR exam, the best strategy include

Memorising questions without understanding

Understanding concepts, practicing MCQs and managing time

Skipping long case studies

Leaving all hard questions for last 5 minutes

None

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

Regulate the employment terms of bank officers

Set rules on capital adequacy, liquidity and risk limits

Promote bank marketing activities

Control interest rates for borrowers

None

Detailed Cash Flow Projection Method-Indirect Format starts with?

Cost of Goods Sold

Operating Profit

Gross Profit

Opening Cash

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 and II

All the above

II and III

I, II and III

None

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

It will dilute the existing ordinary shareholder's control

The cost is lower than ordinary shares

It will not dilute the existing ordinary shareholder's control

Fixed dividend will only be distributed if the company makes profit

None

Which of the following is not a management style?

Extravagant

Conservative

Speculative

Aggressive

None

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

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

To issue guidelines, regulations and directives

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

None

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 and II

I only

I, III and IV

III and IV

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

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

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 help Bumiputra gain access to credit facilities from financial institutions

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

None

The prime objective of development finance institution is to provide _________

Short- and medium-term funds

Capital expenditure financing

Medium- and long-term funds

Long-term funds

None

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

Every agreement made in breach of the Act is invalid

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

Certain parties are exempted from liability

None

Under CAMPARI, "Margin" refer to

Borrower's wealth

Profit Margins of the lender

Percentage of financing the bank is willing to extend

Regulatory margin of financing

None

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

Target market, verification, evaluation and approval

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

Origination, approval and administration

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

None

A blacklist system exists primarily for

determining the customer’s existing relationship with FI

verifying personal data on borrowers or guarantors

enforcing prohibitions and removing rights of defaulters

providing information leads into past track records

None

The following are forms of capital reserve EXCEPT

Assets revaluation

Share premiums

Bonus shares issue

Capital redemption reserve funds

None

Which of the following are recognised as keepers liquidity?

FSA Inter-bank market

Money markets

Discount houses

Money brokers

None

Adjudication is the process of

registering a MOT

attesting the signature on charge documents

assessing land value and stamp duty payable

registering a charge that has been presented

None

Financing Gap is determined by

Stock + Debtor - Creditor

Stock Turnover Period - Debtors Turnover Period + Creditors Turnover Period

Stock + Debtors

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

None

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

Working Capital

Retained profit

Long term liabilities

Capital injections

None

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

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

to provide a comprehensive regulatory and supervisory framework of the DFIs

to ensure safe and sound financial management of the DFIs

None

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

Payment System Act 2003

FSA 2013

Company Act 1965

IFSA 2013

None

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