What is the role of Cash Flow?
The role of Cash Flow lies in showing the movement of cash between two points of time. It shows where the cash had come from and where it was utilized.…
What is Assets to Turnover Ratio?
An Asset to Turnover Ratio is an efficiency indicator which shows what multiple is turnover of the total assets employed in a business.
What is the difference between Quick Ratio and Current Ratio?
The inclusion of inventory in Current Ratio and its exclusion from the Quick Ratio is the key difference between the two.
What have you learnt from Financial Statement Analysis?
FSA is an extremely important tool for enabling the management to: ▪ Evaluate business performance on all the key parameters such as profitability, solvency, efficiency, and wealth building. ▪ Determine…
Distinguish between long term and short-term debt?
Long term debt may be defined as one which is used to fund the capital of a business. In other words, it is intended to be invested in long term…
What is working capital? How will you calculate it?
Working capital is the excess of current assets over current liabilities. In other words, it is the money invested in those assets of a business which are intended to be…
What is Distressed Securities?
A financial instrument in a company that is near or is currently going through bankruptcy. This usually results from a company's inability to meet its financial obligations. As a result,…
What is Credit Risk?
Credit risk is the risk taken by a bond investor that the bond's issuer will default by failing to pay interest and repay principal on schedule.
What is Credit Crunch?
A sudden drop in the general availability of loans or a sudden increase in the cost of borrowing from banks is known as a credit squeeze.
What is net worth of a company?
Net worth is the amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is…
What is Loan to Value Ratio?
A loan-to-value (LTV) ratio is an equation that lenders use to assess the amount of risk associated with a loan. In other words, how much loan borrower is getting against…
What is Down Payment?
A down payment is the amount of cash you pay upfront toward the purchase of a home. It's often expressed as a percentage of the selling price of a home—typically…
What is Debt to Income Ratio?
Your debt-to-income ratio (DTI) is a measure of your monthly debt compared to your monthly income, calculated by your monthly debt divided by your monthly gross (pre-tax) income. DTI is…
What kinds of credit facilities are available to businesses?
Two categories of credit facilities exist: Quick loans, primarily for working capital requirements. Overdraft, letter of credit, factoring, export credit, and other short-term loans are only a few examples. Loans…
How would you decide whether to lend to a business?
There are numerous things I would consider. First, examine the company's financial performance over the last five years by looking at all four financial statements. Then consider the overall assets,…
How do credit rating companies helps in credit analysis?
By examining the outstanding debts of a company, credit agencies assist the market evaluate the creditworthiness of that company. However, it wouldn't be wise to put all your faith on…
Are banks targeting a specific debt-to-capital ratio?
There is no fair debt-capital ratio because it might vary from business to business. For new businesses, the debt would be little or non-existent. Therefore, the debt-to-capital ratio for start-ups…
What is DSCR? [Very important]
DSCR = Net Operating Income / Total Debt Service Where total debt service is annual principal + interest payment to be made DSCR ratio gives an idea of whether the…
What does “interest coverage ratio” mean?
One of the most significant interview questions for credit analysts is this one. A business must pay interest when it takes on debt. The interest coverage ratio demonstrates to the…
How is a Credit Analyst different from a Loan Officer?
These two are very commonly confused positions. The two may look similar but they are very different. While a loan officer helps the customers through the process of procuring the…
What are the important responsibilities of a Credit Analyst?
Your answer to this question, tells the interviewer, if you are aware of the responsibilities you’ll need to perform in this role, your capability, readiness, and commitment. Make sure that…
What Is Underwriting? Explaining the Underwriting Process
Though it might sound complicated, underwriting simply means that your lender verifies your income, assets, debt, and property details to issue final approval for your loan. Underwriting happens behind the…
What is credit Analysis?
Credit Analysis is the process of getting together the financial information about a customer (corporations and individuals) and evaluating it to assess their ability to repay a loan, they have…