Certificate in Credit T24 – 5R Strategic Consultancy Sdn Bhd

Name

Under 5Cs of credit, Capacity is one of the factors to be assessed on a potential borrower. The following assessment of the capacity include

I. Financial capacity
II. Legal capacity
III. Management capacity
IV. Industry capacity

II, III and IV

I, II and IV

I, II and III

All the above

None

Under Section ST FSA 2013, a person must obtain approval from BNM before acquiring on interest in the shares of licensed person if the acquisition results in

1% or more

10% or more

25% or more

5% or more

None

Under AMLATFA, which of the following actions is required from credit officers?

Report suspicious transactions to police

Report suspicious transactions to Branch Manager

Conduct Due Diligence on customer

Report suspicious transactions to Financial Intelligence and Enforcement Department or BNM

None

Which of the following is resident?

A branch of Malaysia company in Brunei

A company owned by non-resident but incorporated in Malaysia

A partnership registered in Brunei and all partners are resident

American Embassy in Malaysia

None

BNM guideline on the SCEL of a banking institution shall be

25% of the Banking Institution Total Capital

5% of the Banking Institution Total Assets

25% of the Banking Institution Total Assets

10% of the Banking Institution Total Capital

None

Lenders need to assess the sufficiency of shareholders or owners' financial commitment in their business. Financial commitment of the shareholder/owner is often measured by the following

I. Shareholder's funds in the business
II. Subordinated loans to the business
III. Third party collateral provided by the owner themselves
IV. Personal net worth of the shareholder

All the above

II, III and IV

I, III and IV

I, II and III

None

Bursa Malaysia Security Exchange is divided into the following markets

I. Money Market
II. Financial Exchange Market
III. Main Market
IV. ACE Market

III and IV

All the above

I and II

I, II and III

None

Different firms in the same industry may se different methods of income recognition. What accounting principle does this relate to?

Realization Principle

Accounting Equation Principle

Dual Entry Principle

Accrual Principle

None

The process of mobilizing funds from savers and depositors and allocating them to users and borrower is known as

Facilitator of Payment

Financial Intermediary

Funds Mobilisation

Credit Process

None

The followings are the advantages of partnership EXCEPT

Able to raise higher capital

Risk and losses can be shared

Minimum regulatory requirement

Unlimited liability

None

In Peninsular Malaysia, the tenancy is for a period less than

3 year

5 year

4 year

2 year

None

In a business, position risk refers to

Diversion of funds to various economic activities

Extent to which business is exposed to price movement

Ability of buyer to honor his commitment

Loss of market share

None

What are the two main areas of materiality that accounting Doctrine of Materiality is concerned with?

I. Materiality of information
II. Materiality of time
III. Materiality of amounts
IV. Materiality of importance

All the above

I and III

II, III and IV

II and IV

None

Which of the following is not a source of funds?

Decrease in debtors

Decrease in stocks

Increase in debtors

Increase in creditors

None

When financing a property without sub-divided title but is situated on a Master Title which is currently charged to another bank, the following undertakings should be obtained from the Master Chargee

I. forward title with discharge of charge
II. exclude financed lot from foreclosure proceedings
III. disclaim interest in the financed lot
IV. refund all monies if discharge of charge cannot be registered

II, III and IV

I, II and III

All the above

I, III and IV

None

Which of the following is true about "Collateral"?

I. The least important factor among 5 Cs
II. To compensate for any weakness of other Cs
III. Is intended to provide lenders with more comfort
IV. Is a (second) way out, not the first way out

I, II and IV

All the above

II, III and IV

I, II and III

None

Which of the following is an example of management lifestyle?

Thrifty

Conservative

Prudent

Willingness to repay

None

Which of the following is the largest and most substantial provider of fund in Malaysian banking system?

Bank Negara Malaysia

Commercial Banks

Development Financial Institution

Islamic Banks

None

Which attribute of a good security cannot be applied to make Malay Reservation Land Sdn Bhd shares?

Encumbrances

Transferability

Enforceability

Assessibility

None

An increase in which of the following items is considered as a source of funds

Trade Debtors

Accounts Receivables

Trade Creditors

Inventories

None

The main objective of BNM's "Best Practice for the Management of Credit Risks" is to

Promote sound governance and oversight of credit risk

maximise profit through aggressive lending

Ensure loan with good security to be approved

Identify, quantify and mitigate risk

None

The following statements relating to financial accounting are true except

Financial reports are prepared for use by parties external to an organisation

Financial reports must comply with General Accepted Accounting Principles

User of these reports are free to specify the types of information required

The format of these financial statement reports are standard

None

Foreign Exchange Administration (FEA), rules and administered by

Exchange Control Act 1953

Bank Negara Malaysia

Registra of Companies

Securities Commission

None

Which of the following ratio is used to measured profitability in relation to operations?

Return on Equity

Return on Asset

Earnings Per Share

Price Earning Ratios

None

Fund diversion to other companies within the same Group or out of the country can be done through the following methods

I. Transfer pricing
II. Dividend policy
III. Retained earning
IV. Dividend payable

I, II and III

II and IV

I and IV

I and II

None

The "Principle of Proportionate Stake" implies that

I. Lenders must ensure that business owners must be sufficiently committed
II. The margin of financing will be less than 100%
III. lenders must ensure that its collateral arrangement position for the same borrower relative to other lenders is not worth off
IV. That credit must always be secured

I and II

II and III

I and III

III and IV

None

The accounting principle of going concern is based on which of the following assumption

A firm would want to perpetuate its existence

A firm that has not submitted its financial statement

A firm that is highly competitive

A firm that has negative net worth

None

The same securities can be taken in different forms. For examples, shares can be taken as a security by way of

I. Assignment
II. Pledge
III. Charge
IV. Hypothecation

II, III and IV

I, II and IV

I, II and III

All the above

None

The Capital Market System consists the followings interlinked market namely

I. Money Market
II. Equity Market
III. Debt Market
IV. Derivative Market

III and IV

II, III and IV

I, II and III

I and II

None

The purpose of a land search is

I. Ascertain the ownership of the land
II. Confirm particulars of the title
III. Check restrictions of conditions on the land
IV. Ascertain existence of any encumbrances

All the above

II, III and IV

I, III and IV

I, II and III

None

The following collateral are generally regarded as loss-free EXCEPT

Fixed deposits

Surrender values of life assurance policies

Freehold properties

Cash margins

None

What is the formula for Dividend Cover Ratio?

Net Profit After Tax - Dividend / Total Ordinary Dividend Declared

Net Profit After Tax - Preference Dividend / Total Ordinary Dividend Declared

Annual Dividend per Share / Market Price per Share

Total Dividend to Ordinary Shareholders / Net Profit After Tax - Preference Dividend

None

Which of the following is the characteristic of good financial analysis?

Prospective Analysis

Elevator Analysis

Historical Analysis

Static Analysis

None

Sections 133 and 133A of the Companies Act 1965 are not applicable to

Non-public listed company

Exempt private company

Public unlisted company

Public listed company

None

In accounting policies and statement review, the following are NOT common Red Flags EXCEPT

Recurring Source of Income

Decrease in Discretionary Cost

Conservative Accounting Policy

Increase in Tangible Asset

None

Solvency ratio measures

the borrower’s ability to meet its short term obligation within the next 12 months on their respective due dates without any rollover of the current liabilities

the borrower's ability to meet its short term obligations

the borrower's ability to meet its short term obligations from the Liquidation of its current assets within the next 12 months

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

None

Which of the following is the most COMMON "trigger" covenant for mitigate possible future unknown risk to a credit?

Event of Default

Condition Precedent

Negative Pledge

Material Adverse Clause

None

Arrange the following items according to the order of how they appear on the profit and loss account of a manufacturing concern

I. Cost of Good Sold
II. Depreciation
III. Dividend
IV. Taxation

II, I, IV, III

I, II IV, III

I, II, III, IV

II, I, III, IV

None

BEA 1949 defines a bill of exchange as

Form of financial guarantee issued by foreign banks

An unconditional order in writing for payment of money at a specific date

An order in writing by exporter to pay money on demand

A conditional order in writing for the payment of money ats specific date

None

Which of the following are not categorised as a form of security?

I. Lien
II. Power of attorney
III. Assignment
IV. Loan agreement

II and IV

I and IV

II and III

I and III

None

A source of funds is represented by a decrease in

Trade Debtors

Short Term Borrowings

Bill Payable

Trade Creditors

None

An operating activity cash flow relates to

Repayment of hire purchase

Day to day core business

Business capital expenditure

Additional debt funding sourced by business

None

When assessing of borrower's capacity, what should the lenders identify?

The borrower's expenses

The borrower's net worth

The borrower's incomes

The borrower's repayment source

None

In order to reward ordinary shareholders without draining cash flow, company declares

Bonus shares

Right issues

Final dividends

Interim dividends

None

Mr. A wish to obtain some credit facilities from B Bank. While conducting the credit assessment, the lender noted on low gearing of 0.5 times. What is lender's next course of action?

Reject application

Approve loan due to the low level of gearing

Request for security

Compute the Debt Service Ratio

None

How do you define ‘indemnity’?

Is an undertaking by a party to the lender to pay up in the event the borrower has defaulted

A contract by which one party promises to save the other from loss caused to him by the conduct of the promiser himself or by the conduct of any third party

It is a straight forward form of lending security

It requires someone to undertake to cause certain action to take place or cause certain action not to take place

None

Which of the following is not the principle of credit risk management?

Every loan should have ways out

Principle of "Well-Spread Lending Portfolio"

Principle of Pari-Passu

Principle of Proportionate Stake

None

The formula for Average Collection Period

Average Trade Debtors / Credit Sales x 365 days

Total Debtors / Total Sales x 365 days

Trade Creditors / Purchases x 365 days

Average Trade Debtors / Cost of Good Sold x 365 days

None

The practice of accounting doctrine of Conversation or Prudence is best demonstrated by which of the following statement?

If a loss is anticipated, it will be stated in the profit and loss statement even though it has yet occur

If a profit is anticipated, it will be stated in the profit and loss statement even though it has yet occur

If a loss is anticipated, it will only be stated in the profit and loss statement even though it has yet occur

Under propoerty investment, valuation is taken from historical price or current market value whichever is higher

None

Which of the following arises out of the operating cycle to determine the net working capital?

Trade debtors, trade creditors & stocks

Current assets, fixed assets & capital

Trade debtor, trade creditor& non-current assets

Current assets, current liabilities & capital

None

Two major components of Financial System in Malaysia are

I. Banking System
II. Financial Market System
III. Capital Market System
IV. Financial Institutions System

I and IV

II and IV

II and III

I and III

None

What does a leverage or gearing ratio measures?

Borrower's reliance on external debts relative to financial ‘commitment of the shareholders

Borrower's ability to repay the borrowings

Measures the efficiency of the Fixed Assets in generating sales

Indicates how much borrowings is required by business

None

Which of the following is the formula for the calculation of average payment period?

Average Trade Creditors / 365 days x Purchase

Average Trade Creditors / 365 days x Sales

Average Trade Creditors / Sales x 365 days

Average Trade Creditors / Purchase x 365 days

None

Sec 2, CBMA, the term "Financial System" refer collectively as

I. Financial Institutions
II. Capital Market Intermediary or Participants
III. Financial Market
IV. Payment System

II and III

I, II and III

I and II

All the above

None

Under Company Act, which of the following is required to verify a company's authority to borrow?

Directors Resolution

Form 9

Form 24

Memorandum ad Article of Associates

None

In lending, lenders have to take both macro and micro perspective of lending proposition. Which of the following are considered micro view of lending?

I. First way out
II. Industry and economic environment
III. Creditworthiness
IV. Growth Rate

I and III

II and III

I only

II and IV

None

Which of the following is common measure of creative accounting?

Revaluation of assets

Changes in income recognition

Changes in accounting year end

Capitalizations of capital reserves

None

Which of the following statement is true?

For gross profit margin, the higher the margin, the better it is as the amount available to cover other operating costs or expenses is larger

For fixed asset turnover ratio, the higher the ratio, the least effective the borrower is using his asset

For assets turnover ratio, the lower the ratio, the better the company is utilizing its total assets

For net operating profit margin, the higher the ratio, the lower the profit

None

Under BNM's "Classification and Impairment Guideline", a loan is considered impaired if

The borrower request a rescheduling

Installments is over due for 3 months or 90 days

Payments scheduled to be made at intervals of 3 months or more, then as soon as default occurres

Letter of demand has been issued

None

Which of the following is not the macro view of credit analysis?

Understanding then borrower's credit worthiness

Understanding the economic environments

Understanding the industry

Understanding the business

None

The following areas should be evaluated by the lender when specific assets are offered as collateral

I. Relationship of the borrower and the owner of the asset
II. The extent of the modification of the collateral
III. The ownership of the asset
IV. The behavior pattern of the asset's value

IV and I

II and III

III and IV

I and II

None

Which of the following is not the purpose of Credit Analysis

Identify and quantify the business risk in lending situation

Analysis cash flow to estimate sources and user of cash to make conclusions with respect to the likelihood or repayment as per the proposed and agreed terms

Make recommendations based on financial and non-financial aspects of credit analysis

Examine the nature of the borrower's business in the context of its industry

None

Which of the following is the most difficult factor to be assessed by lenders in the 5 Cs?

Collateral

Capacity

Capital

Character

None

Trade-related gearing has lower risk than capital expenditure-related gearing due to

Funds can be used for any purpose

Cash conversation cycle is shorter

Payment obligations that need to be serviced are fixed

Payment obligations that need to be serviced are variable

None

Information required by the Companies Act 1965 in published in the financial statement includes the following except

Personal borrowing of the directors

Depreciation

Director's remuneration

The manner in which the value of fixed assets has been determined

None

The following shareholdings are regarded as substantial shareholders:

More than 5% shareholdings

5% or more shareholdings

More than 50% of shareholdings

20% to 50% of shareholdings

None

The following are examples of external macro influences that affect borrower's ability to honor their obligations to lender EXCEPT

Legislative and regulatory framework

Globalization

Foreign currency markets

Changes in lenders goal and objectives

None

BNM issues prudential standard under Section 47 - 48 primarily to

Promote bank marketing activities

Set rules on Capital Adequacy liquidity, risk management and related partly transactions

Outline contraventions and offence under the provisions of the act

Regulate the employment, terms and conditions of the bank

None

Under the National Land Code1965, which one of the following is considered as alienation of the land?

Local authorities approve Certificate of Fitness application

State authority granted title on land to leasehold land owner

Land office approves registration of easements

Land office approves sub-division of land title

None

Which type of security do you need to be registered with the Companies Commission of Malaysia?

Personal Fixed Deposit

Unit Trust

Corporate Fixed Deposit

Stock and Shares

None

Which of the following is best defines corporate governance?

Directors and senior management should be able to prevent mismanagement owing to abuse of power or conflict of interest

Directors and senior management are to establish and maintain adequate system that are able to monitor and control the internal policy

Overall supervision and control of the directors and senior management of the company

Overall supervision of the human capital by Directors and senior management

None

Which of the following is the best approach to determine the finding requirements of business?

Use of Profit & Loss of the business

Use of Balance Sheet of business

Depends on borrower's request

Review with other lenders

None

When comparing a trading company to a manufacturing company, the typical characteristic of the trading company is

Low capital outlay

Large capital expenditure

Low gearing

High operating profit margin

None

Bankruptcy action can be pursued when the judgement sum is

at least RM 10,000.00

at least RM 30,000.00

at least RM 50,000.00

at least RM 100,000.00

None

Process involves risk taking. What is the most necessary step for risk management?

Mitigate Risk

Eliminate Risk

Control Risk

Identify Risk

None

AMLATFA mandates that financial institutions must

Reject all cash transaction of RM 50,000.00 and more

Monitor borrowers criminal records

Report all loans above RM 1.0 million to BNM

Conduct customer due diligence and maintain records

None

What is the main purpose of the a Code of Conduct in an organisation?

To list job description and KPI

To promote corporate branding

To describe the company's financial strategy

To specify expected behavior and rules for employee

None

One of the adjustments which may be required to reconcile for the different between profit and actual cash flow for the business in a year is

Net working capital

Seasonality

Inflation

Capital expenditure

None

Collateral is the least important factor in 5Cs. Under what circumstances collateral becomes more important?

I. Credit risk increases
II. Size of loan increases
III. Market risk increases
IV. Credit line increases

III and IV

I and III

II and IV

I and II

None

Which shareholders entitled to right issues?

Both preference and ordinary shareholders

Preference shares

Ordinary shareholders

All shareholders

None

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