What is CAGR? Should CAGR be high or low?
● The compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming…
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 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 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…
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…
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 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…
Explain Foreign Exchange Risk?
Foreign exchange risk may be defined as the risk that a bank may suffer losses as a result of adverse exchange rate movements during a period in which it has…
EXPLAIN DURATION GAP ANALYSIS MODEL ?
Duration is an important measure of the interest rate sensitivity of assets and liabilities as it takes into account the time of arrival of cash flows and the maturity of…
LIST THE BASIC ASSET LIABILITY MANAGEMENT (ALM) MODELS?
Analytical models are very important for ALM analysis and scientific decision making. The basic models are as follows: (a) GAP Analysis Model (b) Duration GAP Analysis Model (c) Scenario Analysis…
EXPLAIN GAP ANALYSIS MODEL ?
Gap analysis model measures the direction and extent of asset-liability mismatch through either funding or maturity gap. It is computed for assets and liabilities of differing maturities and is calculated…
DISCUSS THE ROLE AND FUNCTIONS OF ASSET LIABLITY MANAGEMENT COMMITTEE
The Asset - Liability Committee (ALCO) consisting of the bank's senior management including CEO should be responsible for ensuring adherence to the limits set by the Board as well as…
ENUMERATE THE THREE REST PILLARS OF ALM PROCESS AS PER RBI GUIDELINES ?
As per the RBI Guidelines on Asset Liability Management (ALM) System, the ALM process rests on following three pillars: (i) ALM Information Systems • Management Information Systems • Information availability,…
DEFINE ASSET LIABILITY MANAGEMENT (ALM)?
Asset Liability Management (ALM) defines management of all assets and liabilities (both off and on balance sheet items) of a bank. It requires assessment of various types of risks and…
RBI GUIDELINES FOR VALUATION OF AVAILABLE FOR SALE
Available for sale (i) The individual scrips in the Available for Sale category will be marked to market at quarterly or at more frequent intervals. (ii) While the net depreciation…
RBI GUIDELINES FOR VALUATION OF HELD FOR TRADING
Held for Trading category The individual scrips in the Held for Trading category will be revalued at monthly or at more frequent intervals and provided for as in the case…
RBI GUIDELINES FOR VALUATION OF HELD TO MATURITY
Held to maturity i) Investments classified under Held to Maturity category need not be marked to market and will be carried at acquisition cost, unless it is more than the…
EXPLAIN THE CLASSIFICATION OF INVESTMENT PORTFOLIO OF THE BANKS?
The entire investment portfolio of the banks should be classified under three categories (a) Held to Maturity (b) Available for Sale and (c) Held for Trading. However, in the balance…
What credit measures do banks often look at? / What typical credit analysis ratios are there?
The most popular credit indicators are - For long term debt: Leverage ratios: Debt / Equity, Debt / Total Capital, Debt / EBITDA, Coverage ratios: Interest Coverage (very important), fixed…
What is working capital and what is net working capital?
Working capital is the amount of a company's current assets minus the amount of its current liabilities. The adequacy of a company's working capital depends on the industry in which…
How do you model working capital for a company?
There are three core components of working capital – accounts receivable, inventories, and accounts payable. These items are usually modeled to match what is happening with revenues and cost of…