CORPORATE CREDIT ANALYSIS DECEMBER 2021 PAST PAPER

WEDNESDAY: 15 December 2021.  Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question.

QUESTION ONE

1.           Enumerate five steps of analysing a credit proposal.  (10 marks)

2.           Evaluate five warning signs that a company is experiencing financial distress. (10 marks)

(Total: 20 marks)

 

QUESTION TWO

1.           Analyse three benefits that a borrower may derive from using a loan amortisation schedule.     (6 marks)

2.           Explain the term “debt instrument”.    (2 marks)

3.           Explain the following types of debt instruments:

Bonds.    (2 marks)

Promissory Notes.        (2 marks)

Treasury Bills.    (2 marks)

4.          Discuss three factors that might influence risk tolerance of an individual investor.   (6 marks)

(Total: 20 marks)

 

QUESTION THREE

1.            Distinguish between “affirmative loan covenant” and “negative loan covenant”.   (4 marks)

2.          A business loan or line of credit could enable you to take on a larger project and manage business growth while maintaining a positive cash flow.

With reference to the above statement, discuss five factors that banks consider when lending to corporates. (10 marks)

3.          Explain three stages of a loan workout.      (6 marks)

(Total: 20 marks)

 

QUESTION FOUR

1.           Analyse three factors that might affect the probability of sovereign debt leading to sovereign credit risk.    (6 marks)

2.          When a company’s revenue is slashed, its continued ability to meet its financial commitments including those relating to loan repayments comes under pressure.

With reference to the above statement, propose seven ways which could be applied by a credit controller to deal with problem accounts.   (14 marks)

(Total: 20 marks)

 

QUESTION FIVE

1.           Highlight four reasons why risk management is an important part of any corporate’s business strategy.    (8 marks)

2.          Explain four features of a partnership agreement.     (8 marks)

3.           Enumerate four types of credit risks.  (4 marks)

(Total: 20 marks)

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