标题: Reading 53: General Principles of Credit Analysis-LOS b 习题 [打印本页]
作者: 土豆妮 时间: 2011-3-22 15:38 标题: [2011]Session 14-Reading 53: General Principles of Credit Analysis-LOS b 习题
Session 14: Fixed Income: Valuation Concepts
Reading 53: General Principles of Credit Analysis
LOS b: Explain and analyze the key components of credit analysis.
Which of the following is one of the four Cs of credit analysis?
The four Cs of credit are character, capacity, collateral, and covenants.
作者: 土豆妮 时间: 2011-3-22 15:38
Rating agencies consider all of the following when assessing the quality of a firm's management EXCEPT:
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Human resources policy. | |
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B) |
Ability to react to unexpected events. | |
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Of the factors listed, the firm's human resouces policies would be the least important factors considered when assessing management quality.
作者: 土豆妮 时间: 2011-3-22 15:39
Which of the following factors is part of the analysis of an issuer’s character?
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B) |
Basic operating position. | |
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Important considerations of the issuer’s character include: strategic direction, financial philosophy, conservatism, track record, succession planning, and control systems.
作者: 土豆妮 时间: 2011-3-22 15:39
Which of the following 4-C's of credit refers to the terms and conditions of the lending agreement?
Covenants represent the terms and conditions of the lending agreement. Covenants specify restrictions and requirements that management must follow.
作者: 土豆妮 时间: 2011-3-22 15:39
Which of the following criteria assesses the ability of the issuer to repay its obligations?
When an analyst examines an issuer’s capacity, the analyst is assessing the issuer’s ability to repay its obligations.
作者: 土豆妮 时间: 2011-3-22 15:39
Which of the following is NOT one of the criteria used to conduct a credit examination?
The four C's of credit are character, capacity, collateral, and covenants.
作者: 土豆妮 时间: 2011-3-22 15:39
All of the following are elements of the "4 C's" of credit analysis EXCEPT:
The other two are covenants and collateral.
作者: 土豆妮 时间: 2011-3-22 15:40
Within the context of the 4-C’s of credit analysis, which of the following most accurately describes the “character” of a firm?
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The terms and conditions of the loan agreement. | |
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The availability of cash flow and other assets to repay the loan. | |
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The integrity of management and its commitment toward the repayment of the loan. | |
"Character" is the integrity of the firm's management and its commitment to the loan.
作者: 土豆妮 时间: 2011-3-22 15:40
Within the context of the 4-C’s of credit analysis, which of the following most accurately describes the “capacity” of a firm?
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The availability of cash flow and other assets required by a corporation to repay its obligations. | |
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The integrity of management and their commitment toward repayment of the loan. | |
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The terms and conditions of the loan agreement. | |
Capacity is one of the 4-C's of credit analysis and deals with generation of cash flows.
作者: 土豆妮 时间: 2011-3-22 15:42
Which of the following items is least likely of concern to the analyst when trying to assess the capacity of the firm to pay its debt?
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Third-party guarantees. | |
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Ability to securitize assets. | |
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Affirmative covenants. | |
When assessing capacity to pay, the analyst is concerned with the company’s financial position and liquidity. Sources of liquidity include working capital, operating cash flows, back-up credit facilities, securitization of assets, and third-party guarantees. Affirmative covenants are not directly related to the firm's capacity to pay.
作者: 土豆妮 时间: 2011-3-22 15:43
Which of the following factors is NOT part of the analysis of an issuer’s character?
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Parent company support agreements. | |
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Parent company support agreements are part of the analysis of the capacity of the issuer to pay rather than the issuer’s character.
作者: 土豆妮 时间: 2011-3-22 15:43
Which of the following factors is least likely part of the analysis of an issuer’s character?
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Executive compensation and benefits structure. | |
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Executive compensation structure is not part of the credit analysis. Credit agencies generally try to assess management quality by understanding business strategies and policies created by management.
作者: 土豆妮 时间: 2011-3-22 15:43
Which of the following is least likely considered a strong and reliable source of liquidity for a company undergoing a credit analysis?
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Ability to use asset securitization. | |
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Contractual back-up facility. | |
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A line of credit is generally not contractual making it easy for banks to refuse to extend the credit.
作者: 土豆妮 时间: 2011-3-22 15:43
All of the following are part of the four C’s of credit that Moody’s and S&
use to analyze credit quality EXCEPT:
The four C’s of credit are character, capacity, collateral, and covenants.
作者: 土豆妮 时间: 2011-3-22 15:43
Which of the following focuses on analyzing the quality of management?
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C) |
Compensation analysis. | |
Character analysis is the act of assessing the quality of management, which is an important factor in assessing the issuing company’s credit strength.
作者: 土豆妮 时间: 2011-3-22 15:44
Which of the following least likely represent sources of liquidity for a company?
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B) |
Investing cash outflows. | |
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Back-up credit facilities. | |
Of the three elements, the investing cash outflows would not be a source of liquidity for the firm.
作者: 土豆妮 时间: 2011-3-22 15:44
Which of the following is most likely to affect the analysis of a firm's ability to repay the interest and principal components of its debt?
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The level of the company's debt to total assets ratio. | |
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The character of the firm's management. | |
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The firm's ability to generate operating cash flows. | |
Although we would look at the company's debt-to-total assets ratio in determining the company's ability to repay its debt, the operating cash flows tend to be more critical to the analysis.
作者: 土豆妮 时间: 2011-3-22 15:44
Which of the following statements regarding the analysis of an issuer’s capacity to pay is least accurate?
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An analyst should examine the firm's financial position over the past three to five years to help determine capacity to pay. | |
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A "material adverse change clause" would weaken a back-up facility. | |
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A noncontractual line of credit is viewed as a strong back-up facility. | |
A strong back-up facility exists when a lender is contractually obligated to provide back-up financing. If the agreement is noncontractual then the back-up facility is considered weak.
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