manchester88

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 integrity of management and its commitment toward the repayment of the loan.

B) The terms and conditions of the loan agreement.

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

---

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

manchester88

Which of the following focuses on analyzing the quality of management?

A) Capacity analysis.

B) Compensation analysis.

C) Character 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.

manchester88

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.

---

Of the factors listed, the firm's human resouces policies would be the least important factors considered when assessing management quality.

manchester88

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

A) Capacity.

B) Coverage.

C) Character.

---

The other two are covenants and collateral.

manchester88

Which of the following accounting practices is least likely to have a significant impact on the balance sheet ratios of a firm?

A) Leasing accounting.

B) Inventory cost flow decisions.

C) Diluted versus basic EPS.

---

LIFO/FIFO and operating leasing v. capital leasing can both have a major impact on the balance sheet ratios of the firm.