Financial Analysis and Credit Management Flashcards
6 cards from real CBP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Analysis and Credit Management flashcards as text
What is the purpose of financial ratio analysis in credit assessment?
Answer: To assess creditworthiness
Financial ratio analysis helps evaluate a borrower's ability to repay by analyzing liquidity, solvency, and profitability.
Which of the following is a key component of a credit report?
Answer: Credit history and repayment record
A credit report includes the borrower’s credit history, outstanding debts, and payment behavior to assess risk.
What does the debt-to-equity ratio measure?
Answer: Financial leverage
The debt-to-equity ratio compares a company's total liabilities to its shareholders' equity, indicating financial leverage.
What is the role of collateral in credit management?
Answer: To secure the loan against default
Collateral serves as security for a loan, reducing the lender’s risk in case of borrower default.
Which financial statement shows a company’s financial position at a specific point in time?
Answer: Balance sheet
The balance sheet reflects a company’s assets, liabilities, and equity at a specific date.
Why is credit scoring important in financial institutions?
Answer: To assess borrower risk efficiently
Credit scoring provides a standardized method to evaluate borrower risk and supports consistent lending decisions.