土豆妮

Which of the following is least likely considered a strong and reliable source of liquidity for a company undergoing a credit analysis?

A) Line of credit.

B) Ability to use asset securitization.

C) 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.

土豆妮

Which of the following 4-C's of credit refers to the terms and conditions of the lending agreement?

A) Covenants.

B) Contracts.

C) Conditions.

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Covenants represent the terms and conditions of the lending agreement. Covenants specify restrictions and requirements that management must follow.

土豆妮

Which of the following criteria assesses the ability of the issuer to repay its obligations?

A) Capital.

B) Commitment.

C) Capacity.

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When an analyst examines an issuer’s capacity, the analyst is assessing the issuer’s ability to repay its obligations.

土豆妮

Which of the following is NOT one of the criteria used to conduct a credit examination?

A) Consideration.

B) Character.

C) Covenants.

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The four C's of credit are character, capacity, collateral, and covenants.

土豆妮

All of the following are elements of the "4 C's" of credit analysis EXCEPT:

A) Capacity.

B) Coverage.

C) Character.

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The other two are covenants and collateral.

土豆妮

Within the context of the 4-C’s of credit analysis, which of the following most accurately describes the “character” of a firm?

A) The terms and conditions of the loan agreement.

B) The availability of cash flow and other assets to repay the loan.

C) The integrity of management and its commitment toward the repayment of the loan.

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"Character" is the integrity of the firm's management and its commitment to the loan.

土豆妮

Rating agencies consider all of the following when assessing the quality of a firm's management EXCEPT:

A) Ability to react to unexpected events.

B) Human resources policy.

C) Strategic direction.

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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.

土豆妮

Which of the following factors is part of the analysis of an issuer’s character?

A) Strategic direction.

B) Company structure.

C) 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.