CORPORATE CREDIT ANALYSIS APRIL 2023 PAST PAPER

TUESDAY: 25 April 2023. Afternoon Paper.                                                                    Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on
this paper.

QUESTION ONE

1.          Outline FOUR factors that a borrower should consider before engaging in a loan workout.  (4 marks)

2.          Describe FOUR types of strategy risks.    (8 marks)

3.          Explain FOUR benefits of good corporate governance.     (8 marks)

(Total: 20 marks)

QUESTION TWO

1.          Explain the following terms as used in credit analysis:

Debt instruments.    (2 marks)

Euro bonds.    (2 marks)

Coupon bonds.     (2 marks)

2.          Enumerate SIX factors a credit analyst should consider when lending to a group of companies.    (6 marks)

3.          Examine FOUR factors that could influence the quality of account receivables as a collateral.              (8 marks)

(Total: 20 marks)

 

QUESTION THREE

1.           Identify SIX metrics used in evaluating a company’s governance risk factors.  (6 marks)

2.          State SIX macroeconomic factors that should be considered when evaluating the level of country risk.   (6 marks)

3.           Evaluate FOUR factors that could influence industry risks.    (8 marks)

(Total: 20 marks)

 

QUESTION FOUR

1.         Describe the term “credit administration”.    (2 marks)

List FOUR responsibilities of the credit administration function.     (4 marks)

2.         Propose SIX types of loan agreement covenants used in corporate lending to minimise the risk of default.    (6 marks)

3.          Summarise FOUR risks associated with working capital loans.     (8 marks)

(Total: 20 marks)

 

QUESTION FIVE

1.          Distinguish between “return on assets” (ROA) and “risk-adjusted return on capital” (RAROC).   (4 marks)

2.         Assess FOUR components of a bond indenture.   (8 marks)

3.         Analyse FOUR factors a credit analyst should consider when constructing a loan portfolio.               (8 marks)

(Total: 20 marks)

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