Preview Questions Credit Analyst | Role Specific Skill

Question 1: A decline in operating profit margins over several quarters could indicate which of the following?

Which action should you take?

Choose only one option

Improved asset turnover

A shift to higher-margin products

Higher interest income

Increased operational inefficiencies or rising costs

Question 2: In what ways do "Non-Recurring Expenses" impact the evaluation of a company's ongoing financial performance, and how should they be treated in your analysis?

Which action should you take?

Choose only one option

I adjust for non-recurring expenses to reflect the company's true operating performance, focusing on sustainable earnings

I include non-recurring expenses without adjusting for their one-time nature

I ignore non-recurring expenses as they are typically one-time events

I treat non-recurring expenses as an indicator of poor financial health

Question 3: Which financial metric is most critical in structuring a loan for a high-leverage borrower?

Which action should you take?

Choose only one option

Loan-to-value ratio

EBITDA margin

Debt-to-equity ratio

Current ratio

Question 4: What does a declining Herfindahl-Hirschman Index (HHI) in an industry signify?

Which action should you take?

Choose only one option

Higher barriers to entry

Consolidation of market players

Reduced regulatory risks

Increasing competition

Question 5: Why is EBITDA often used in credit analysis?

Which action should you take?

Choose only one option

All of the above

Excludes the impact of leverage

Reflects operational cash flow

Ignores taxes and depreciation

Question 6: How does the presence of a public record, such as bankruptcy, affect a borrower's credit score?

Which action should you take?

Choose only one option

It only affects the score if the bankruptcy occurred in the last two years

It has a temporary effect, and the score can recover over time

It significantly lowers the score and stays on the record for several years

It has no effect as it is considered an isolated incident