Preview Questions Credit Analyst | Role Specific Skill

Question 1: How do you analyze the "Credit Performance History" of a borrower when their credit score has fluctuated significantly over time?

Which action should you take?

Choose only one option

I focus on the borrower's current income and disregard credit score fluctuations

I assume that fluctuations in credit scores are inconsequential if the borrower is currently in good standing

I look at the underlying causes of fluctuations, such as changes in credit utilization or payment history, to assess future risk

I rely on the most recent credit score without considering past performance

Question 2: How should a Credit Analyst interpret a declining trend in a company's Return on Assets (ROA) over three consecutive quarters?

Which action should you take?

Choose only one option

The company is experiencing decreasing profitability relative to its assets

The company is becoming more efficient in using its assets

The company's debt levels are decreasing

The company's equity is increasing

Question 3: Which financial statement ratio would most accurately show a company's ability to generate sufficient cash to meet short-term obligations?

Which action should you take?

Choose only one option

Debt-to-Equity Ratio

Return on Equity (ROE)

Quick Ratio

Gross Profit Margin

Question 4: Which variable is most critical in assessing counterparty credit risk for derivatives?

Which action should you take?

Choose only one option

Collateral value

Potential future exposure (PFE)

Netting arrangements

Credit spread

Question 5: How are Non-Performing Loans (NPLs) typically reported in a bank's financial statements?

Which action should you take?

Choose only one option

They are written off and removed from the balance sheet

As a separate line item under assets

As part of operating expenses

As part of the loan loss provisions

Question 6: What is the impact of a high Interest Rate Risk on a bank's loan portfolio?

Which action should you take?

Choose only one option

It has no impact on the loan portfolio

It increases the likelihood of loan defaults due to higher borrowing costs

It decreases the cost of borrowing for customers

It enhances the bank's profitability