CORPORATE CREDIT ANALYSIS DECEMBER 2023 PAST PAPER

TUESDAY: 5 December 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. Explain THREE causes of credit quality deterioration. (6 marks)

2. In relation to investment in financial assets, analyse THREE elements of securities underwriting function. (6 marks)

3.  Management factor is one of the main considerations in a credit analyst’s endeavour to fully understand the credit risk posed by a borrower.

In reference to the above statement, discuss FOUR credit risks associated with managerial behaviour. (8 marks)

(Total: 20 marks)

 

QUESTION TWO

1.  With reference to credit risks in debt instruments:

Explain the term “Debt instruments”. (2 marks)

Distinguish between “long term debt instruments” and “short term debt instruments”. (4 marks)

2. Outline SIX roles of a company’s finance strategy worth noting by credit analysts. (6 marks)

3. Identify FOUR factors that a credit analyst should consider in determining the choice of credit terms for a company. (8 marks)

(Total: 20 marks)

 

QUESTION THREE

1. State FOUR types of derivatives that give rise to counterparty credit risk. (4 marks)

2. Identify FOUR corporate credit risks inherent in each of the four stages of industry life cycle. (8 marks)

3. Propose FOUR factors that could guide a credit analyst in determining the choice of business finance. (8 marks)

(Total: 20 marks)

 

QUESTION FOUR

1.  Outline SIX key competencies of effective credit managers. (6 marks)

2. Summarise THREE applications of data analytics and technology in loan portfolio management. (6 marks)

3. Explain FOUR factors considered when granting business loans. (8 marks)

(Total: 20 marks)

 

QUESTION FIVE

1. Explain qualitative factors used in evaluating corporate borrowers credit worthiness under the following headings:

Corporate governance. (3 marks)

Industry and competition. (3 marks)

2. Describe THREE differences between “corporate strategy” and “business strategy” as used in credit analysis. (6 marks)

3. Explain FOUR factors considered when evaluating term loans. (8 marks)

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