(PG234091)
Special carry over examination, 2024-25
Course Name & Branch: Master of Business Administration MBA
Year & Semester: 2nd Year & 4th Sem
Subject Name: Financial and Credit Risk Analytics
Paper Name: Financial and Credit Risk Analytics Paper Code: MBA FM05
[Time – 2:00 Hrs] [Max. Marks: 100]
Note:- Attempt all questions from Section-A (Objective type questions), Four questions from Section–B (Short
answer type questions) and One question from Section–C (Long answer / essay type questions).
SECTION–A 20x2=40
1. Which guarantee is primarily issued to 8. Which of the following is NOT an aspect of
assure repayment or performance if a contractor corporate governance?
or supplier fails to deliver as per contract terms? a) Transparency
a) Performance Guarantee b) Accountability
b) Deferred Payment Guarantee c) Risk management oversight
c) Financial Guarantee d) Guaranteed profit for shareholders
d) Tender Guarantee 9. Which of the following is a likely outcome of
2. Which of these is not a type of Bank Guarantee? poor recruitment & training in operational risk
a) Performance Guarantee management?
b) Financial Guarantee a) Increased human error and fraud risk
c) Deferred Payment Guarantee b) Better compliance
d) Overdraft Guarantee c) More efficient system audit
3. Which of these is not a type of Letter of Credit d) Stricter delegation of authority
(LC)? 10. Which of the following is NOT a type of risk
a) Irrevocable LC commonly faced in financial institutions?
b) Revocable LC a) Credit risk
c) Confirmed LC b) Market risk
d) Deferred Payment Guarantee LC c) Operational risk
4. Which of the following best represents a d) Flavor risk
working capital facility? 11. Which of the following is a control mechanism
a) Term loan for machinery in operational risk management related to
b) Housing loan personnel?
c) Cash Credit Limit a) Recruitment & Training
d) Agricultural long-term loan b) Market risk mitigation
5. What is the main source of income for a bank c) Foreign exchange hedging
from fund-based credit? d) Credit scoring
a) Commission income 12. What is the primary purpose of credit
b) Interest income analysis?
c) Guarantee fee a) To maximize sales revenue
d) Forex margin b) To assess the creditworthiness of a borrower and
6. Which of the following is a fund-based credit the risk of default
facility? c) To determine the product mix of a firm
a) Letter of Credit d) To calculate the company's market share
b) Bank Guarantee 13. Which one is *NOT* a stage in the credit
c) Cash Credit analysis process?
d) Performance Guarantee a) Data gathering and verification
7. Which of the following is NOT a mode of credit b) Profitability and risk assessment
delivery? c) Pricing of loan / setting terms
a) Direct cash d) Marketing strategy formulation
b) Transfer to account 14. Profitability analysis in credit assessment
c) Cheque typically includes which of the following ratios?
d) SMS a) Gross profit margin, net profit margin, return on
equity (ROE) the operating cycle / cash cycle risk?
b) Current ratio, quick ratio a) Monitoring the ratio of fixed costs to variable
c) Debt‑to‑equity ratio, interest coverage ratio costs
d) Inventory turnover, receivables turnover b) Time between payment for inputs and collection
15. Which ratio measures the ability of a firm to from customers
pay interest charges from its earnings before c) Magnitude of long‑term debt in the capital
interest and taxes (EBIT)? structure
a) Debt‑to‑equity ratio d) Estimation of market growth
b) Current ratio 19. When pricing a loan, a lender will consider
c) Interest coverage ratio which of the following?
d) Return on assets (ROA) a) Risk premium for default, cost of funds,
16. Working capital is defined as: administrative costs
a) Total assets minus total liabilities b) Only cost of funds
b) Current assets minus current liabilities c) Only collateral value
c) Inventory plus receivables d) Only the borrower's industry
d) Fixed assets plus current assets 20. Credit Rating is best described as:
17. Liquidity risk in the context of credit analysis a) The method of assessing how many loans a bank
relates to: has issued
a) The firm’s ability to generate profit over the long b) A measurement of risk of default / relative
term creditworthiness of an entity (or obligation) by
b) The firm’s ability to meet its short‑term internal or external agency
obligations as they fall due c) A way to compute profitability of equity
c) How efficient the operations of the firm are investments
d) How fast it can increase its market share d) A method to decide stock price
18. Which one of the following is concerned with
SECTION–B 4x10=40
Attempt Four Questions only
1. Discuss the various types of Bank Guarantees and explain the process for assessment and
determination of guarantee limits.
2. Discuss the various types of Bank Guarantees and explain the process for assessment and
determination of guarantee limits.
3. Define Financial Credit and explain the objectives of credit with reference to credit risk and the credit
process.
4. What are non-fund based facilities? Describe various types of Letters of Credit and their assessment.
5. Discuss the various types of credit facilities available in banking and elaborate on their
documentation and delivery mechanisms.
6. Explain the concept of trade credit risk. How do statutory restrictions and credit appraisals impact
lending decisions?
SECTION–C 1x20=20
Attempt ONE Questions only
1. How do credit analysts use financial ratios to assess a firm's solvency and default risk? Illustrate with
examples.
2. Describe the methodology of credit rating and the differences between internal and external rating
systems with suitable examples.