National NISHANT SHUKLA

Institute of
Bank
Management
Dashboard  My courses  CRD MGMT  MODULE I : BASICS OF
CREDIT AND CREDIT PROCESS  EOM I: TEST: 01-01-2023

Started on Sunday, 1 January 2023, 2:42 PM

State Finished
Completed on Sunday, 1 January 2023, 3:11 PM
Time taken 28 mins 28 secs
Grade 52.50 out of 60.00 (88%)

Question 1 Correct Mark 0.50 out of 0.50

ECGC's special approval list comprises of

Select one:
a. List of countries export to which require
special approval
b. List of countries import from which
require special approval
c. List of goods that are approved to be
imported without any duty
d. Names of exporters whose risk are high
Question 2 Correct Mark 0.50 out of 0.50

If the present value of cash flows generated by

an initial investment of Rs.100,000 is Rs.120,000,
what is the NPV of the project?

Select one:
a. Rs 220000
b. Rs 20000
c. Rs 120000
d. Rs 100000

Question 3 Correct Mark 0.50 out of 0.50

In which one of these entities, lenders will in the

normal course have recourse not only to the
assets employed in business but also to the
private assets of the owners?

Select one:
a. Private limited companies
b. Proprietary Firms
c. Public Limited Companies
d. Limited liability Partnerships

Question 4 Correct Mark 0.50 out of 0.50

Limited liability partnership to be registered with

Select one:
a. No registration is required
b. Registrar of Companies
c. Registrar of Assurances
d. Registrar of Firms
Question 5 Correct Mark 0.50 out of 0.50

Registration and incorporation under the

relevant Act of Law is necessary in the case of (a)
Company(b) Partnership firm(c) Limited Liability
Partnership firm(d) Proprietary firm

Select one:
a. (a) and (c)
b. (a) (b) and (c )
c. (b) and (c)
d. (a) and (d)

Question 6 Correct Mark 0.50 out of 0.50

The Credit worthiness of a borrower "DOES

NOT" depend on one of the following:

Select one:
a. The market reputation of the borrower

b. The character of the borrower

c. The financial standing of the borrower
d. The capacity of the borrower to repay

Question 7 Correct Mark 0.50 out of 0.50

The responsibility to formulate lending policies

and to supervise their implementation lies with

Select one:
a. All the given options
b. The Board of a Bank
c. The Chief Credit Officer
d. Credit Officers at the Branches
Question 8 Correct Mark 0.50 out of 0.50

Which of the following is a feature of a demand

loan?
a. Loan that can be called back by the lender
anytime
b. Offered normally for meeting working capital
requirements
c. Both options 'a' and 'b'
d. Term loans

Select one:
a. Option A
b. Option D
c. Option C
d. Option B

Question 9 Correct Mark 0.50 out of 0.50

Which one of the following does not come under

the category of wilful default?

Select one:
a. Disposal of fixed assets offered as
security for term loan without knowledge of
the lender
b. Deliberate non-payment of the dues
despite adequate cash flow
c. Bank finance was availed of but was
diverted for other purposes
d. Sale of finished good produced using
working capital finance
Question 10 Incorrect Mark 0.00 out of 0.50

Which one of the following has net profit as the

basis of calculation?

Select one:
a. Internal Rate of Return
b. Payback Period
c. Average Rate of Return
d. Net Present Value

Question 11 Correct Mark 0.50 out of 0.50

Which one of the following is "NOT TRUE"

regarding the Term Loan facility offered by
Banks?

Select one:
a. Term Loans are sanctioned only to
business persons for productive purpose
b. Term Loans are sanctioned for a
specified period
c. Term Loans are to be repaid in specified
number of instalments
d. Term Loans are generally sanctioned for
creating/ acquiring assets

Question 12 Correct Mark 0.50 out of 0.50

Which one of the following is a legal person?

Select one:
a. Partnership Firms
b. Limited Company
c. Limited Liability Partnerships
d. Proprietary Firms
Question 13 Correct Mark 0.50 out of 0.50

Which one of the following is a related party

transactions?

Select one:
a. Significant acquisitions or dispositions of
assets
b. Recognition of other income for the
purpose of income smoothing
c. Sharing of resources and common costs
with other family run businesses
d. Employees related payments like EPF,
ESI, gratuity, pension, etc

Question 14 Correct Mark 0.50 out of 0.50

Which one of the following is "NOT" a type of

Working Capital facility?

Select one:
a. Overdraft
b. Cash Credit
c. Deferred Payment Guarantee
d. Bills Purchase

Question 15 Correct Mark 0.50 out of 0.50

Which one of the following is an item of

intellectual property of a firm?

Select one:
a. Exclusive supply agreements
b. Technology license
c. Book debts more than six month due
d. Assets of a company hypothecated to a
bank
Question 16 Correct Mark 0.50 out of 0.50

Which one of the following is known as a

perpetual entity?

Select one:
a. Proprietary Firms
b. Limited Company
c. Limited Liability Partnerships
d. Partnership Firms

Question 17 Correct Mark 0.50 out of 0.50

Which one of the following is not a non fund

based credit?

Select one:
a. Co-acceptance of bills
b. Buyer's credit
c. Seller's credit
d. Bill discounting

Question 18 Correct Mark 0.50 out of 0.50

Which one of the following issues about

intangible assets would be of concern for bank
lending?

Select one:
a. Potential infringement of intellectual
property of others
b. Proprietary processes controlled by the
Company
c. All the given options
d. Agreements for licensing of technology
from third parties
Question 19 Correct Mark 0.50 out of 0.50

Which one of the following is not an item in a

cash budget?

Select one:
a. Opening balance of cash
b. Account revievables
c. Payment to suppliers
d. Collection from customers

Question 20 Correct Mark 0.50 out of 0.50

Which one of the following Non-fund based

facilities do "NOT" fall under the category of
Working Capital finance?

Select one:
a. Deferred Payment Guarantee
b. Performance Guarantee
c. Import Letter of Credit
d. Inland Letter of Credit

Question 21 Correct Mark 1.00 out of 1.00

A project is considered to be financially viable if

its Internal Rate of Return is

Select one:
a. Higher than cost of capital
b. Higher than cost of debt
c. Less than cost of capital
d. Equal to cost of debt
Question 22 Correct Mark 1.00 out of 1.00

A Red Clause LC is a type of

Select one:
a. Deferred credit
b. Anticipatory credit
c. Countervailing credit
d. Restricted credit

Question 23 Correct Mark 1.00 out of 1.00

An advising bank advises a letter of credit at the

request of the

Select one:
a. Buyer
b. Seller
c. Issuing bank
d. Confirming bank

Question 24 Correct Mark 1.00 out of 1.00

Credit Administration functions does "NOT"

include

Select one:
a. Making and implementing Credit Policy
b. Credit monitoring and supervision
c. Deciding Lending Authority
d. Defining the standards of customer
service
Question 25 Correct Mark 1.00 out of 1.00

Decisions regarding retention of profit in a

company are most closely associated with

Select one:
a. All the given options
b. Growth potential
c. Dividend payout
d. Investment opportunity

Question 26 Correct Mark 1.00 out of 1.00

DSCR refers to the ability of a project to pay

Select one:
a. Interest and principal from out of
operating profit
b. Interest from out of its net profit
c. Interest from out of its operating profit
d. Interest and instalment from out of its
operating cash flows

Question 27 Incorrect Mark 0.00 out of 1.00

For determining the NPV of a project, which one

of the following must be subtracted from the
present value of cash flows

Select one:
a. Terminal value
b. Project cost
c. Bank borrowing
d. Residual value
Question 28 Correct Mark 1.00 out of 1.00

In an export LC transaction, the bank which is

allowed to make payment against the
documents is called

Select one:
a. Confirming bank
b. Advising bank
c. Negotiating bank
d. Issuing bank

Question 29 Correct Mark 1.00 out of 1.00

In which one of the following Bank Guarantees

(BG), the risk of loss need not necessarily be
related to the creditworthiness of the
counterparty involved?

Select one:
a. Guarantees for credit facilities
b. Guarantees for assuring certain technical
performance
c. Guarantees for mobilisation advance
before the commencement of a project
d. Guarantees in lieu of repayment of
financial securities
Question 30 Correct Mark 1.00 out of 1.00

MPBF2 is a method which estimates working

capital based on

Select one:
a. Operating cycle
b. Cash flow
c. Turnover
d. Balance sheet

Question 31 Correct Mark 1.00 out of 1.00

NPV of a project is calculated as

Select one:
a. Sum of present value of all cash flows –
Project Cost
b. Sum of all cash flows – Present value of
project cost
c. Present value of sum of all cash flows –
Project Cost
d. Sum of all cash flows – Project Cost

Question 32 Correct Mark 1.00 out of 1.00

The General Guidelines in Credit Policy does

"NOT" include

Select one:
a. Guidelines regarding Rate of Interest on
Term Deposit
b. Guidelines for Loan Review and Grading
system
c. Guidelines on the Loan to Value
d. Guidelines on the methods of
Assessment of Credit
Question 33 Correct Mark 1.00 out of 1.00

The ratio (Current Assets - Inventory) / (Current

Liabilities) is known as

Select one:
a. Quick ratio
b. Liquid ratio
c. Current ratio
d. Cash ratio

Question 34 Correct Mark 1.00 out of 1.00

What is the target for priority sector lending, as

percentage of ANBC, applicable to scheduled
commercial banks in India?

Select one:
a. 0.4
b. 0.1
c. 0.18
d. 0.075

Question 35 Correct Mark 1.00 out of 1.00

Which of the following does not happen at the

event of devolvement of a letter of credit?

Select one:
a. Cash credit account of the borrower is
fully drawn
b. Borrower account becommes an NPA

c. Bank has to make payment from its own

fund
d. Non fund exposure converts to funds
based exposure
Question 36 Correct Mark 1.00 out of 1.00

Which one of the following activities in the cash

flow statement would repayment of loan be
included?

Select one:
a. Investment
b. Financing
c. Development
d. Operating

Question 37 Correct Mark 1.00 out of 1.00

Which one of the following allows testing the

impact of changing multiple variables at one
time?

Select one:
a. Cash flow Analysis
b. Sensitivity Analysis
c. Scenario Analysis
d. Financial Analysis

Question 38 Correct Mark 1.00 out of 1.00

Which one of the following companies is exempt

from preparing cash flow statement?

Select one:
a. All the given options
b. Small company with paid up capital not
exceeding Rs 50 lakh
c. One person company
d. Small company with turnover not
exceeding Rs 2.0 crores
Question 39 Correct Mark 1.00 out of 1.00

Which one of the following conditions is

necessary for issuing LC to a customer not
enjoying a credit limit with the bank?

Select one:
a. Have a credit limit with another bank
b. Must be able to retire bills drawn under
L/C
c. Keep 100% cash collateral
d. Have a current account with the bank

Question 40 Correct Mark 1.00 out of 1.00

Which one of the following is "TRUE" regarding

Working Capital finance?

Select one:
a. Working Capital finance is sanctioned for
a period not less than three years
b. Working Capital finance is sanctioned for
meeting the gap in the cash flow between
purchase of raw material and collection of
sale proceeds from the customers
c. Working Capital finance is sanctioned for
acquiring furniture and fixtures in a shop
d. Working Capital finance is sanctioned for
investment in new business by the borrower
Question 41 Correct Mark 1.00 out of 1.00

Which one of the following is "NOT" a crop loan

facility for Agriculture?

Select one:
a. Finance for purchase of pesticides
b. Finance for purchase of seeds
c. Finance for purchase of fertilisers
d. Finance for purchase of pump set

Question 42 Correct Mark 1.00 out of 1.00

Which one of the following is "NOT" a feature of

the Credit Policy of Banks?

Select one:
a. It defines the Authority and
Responsibility attached to functionary in
credit departments/branches
b. It should be updated periodically
(normally annually).
c. It is explicit about the Risk management
d. It should be approved by RBI

Question 43 Correct Mark 1.00 out of 1.00

Which one of the following is "NOT" an

Investment Credit facility for Agriculture?

Select one:
a. Finance for purchase of harvesting
machine
b. Finance for purchase of fertilisers
c. Finance for purchase of a tractor
d. Finance for purchase of irrigation system
Question 44 Incorrect Mark 0.00 out of 1.00

Which one of the following is "NOT" applicable to

Demand Loan?

Select one:
a. This loan can be called back by the Bank
anytime
b. This loan is normally sanctioned to meet
Working Capital requirements
c. The "call option" can be exercised by the
Bank only with the consent of the borrower
d. Drawing money from the demand Loan
by cheque is not allowed

Question 45 Incorrect Mark 0.00 out of 1.00

Which one of the following is "NOT" the feature

of the Discounting/Purchase of Bills facility by
Banks?

Select one:
a. Banks charge Commission and Interest
on discounting of the Usance Bills
b. It is a facility to provide credit against
receivables
c. Banks charge interest from the date of
Discounting of the Bill till realisation of the
same
d. Banks charge Commission and Interest
on purchase of the Demand Bills
Question 46 Correct Mark 1.00 out of 1.00

Which one of the following is "TRUE" regarding

Partnership Firms?

Select one:
a. Profit earned by the Partnership Firm
should be shared equally amongst the
partners.
b. Partnership agreement need not be
necessarily for carrying out of a Business
c. As per law, a partnership firm need not
be compulsorily registered
d. The business of the Partnership firm
MUST be conducted by all

Question 47 Correct Mark 1.00 out of 1.00

Which one of the following is a working capital

product offered by banks to assist units in
distress?

Select one:
a. Overdraft
b. Cash credit
c. Working capital term loan
d. Asset based finance

Question 48 Correct Mark 1.00 out of 1.00

Which one of the following is actually not a ratio?

Select one:
a. Earning per share
b. Price to earning
c. Price to book value
d. Payout ratio
Question 49 Correct Mark 1.00 out of 1.00

Which one of the following is not a feature of an

open ended Bank Guarantee?

Select one:
a. Liability of the bank is perpetual
b. Issued without notwithstanding clause

c. Has a indefinite maturity period

d. Has a inbuilt auto renewal clause

Question 50 Correct Mark 1.00 out of 1.00

Which one of the following is the mechanism to

ensure the liquidity in Banks?

Select one:
a. Asset Liability Management (ALM)
b. Loan Review Mechanism (LRM)
c. Quarterly Information System (QIS)
d. Risk Management Systems
Question 51 Correct Mark 2.00 out of 2.00

A branch has sanctioned cash credit limit of

Rs.12 lac to a firm. As at the close of January 31,
it has been carrying stocks worth Rs.9 lac,
sundry creditors of Rs.3 lac and book debts of
Rs.6 lac. Bank has prescribed a margin of 25% on
stocks and 30% on book debts. What is the
maximum amount that can be withdrawn in the
cash credit account?

Select one:
a. Rs 7.25 lakhs
b. Rs 7.95 lakhs
c. Rs 6.35 lakhs
d. Rs 9.40 lakhs

Question 52 Correct Mark 2.00 out of 2.00

A firm has been sanctioned a cash credit limit of

Rs.4 lac. It submits stock statement for stock
valued at Rs.6 lac. The margin is 25%. What is the
amount of drawing power in the account?

Select one:
a. Rs 4.5 lac
b. Rs 4.0 lac
c. Rs 5.0 lac
d. Rs 3.5 lac
Question 53 Correct Mark 2.00 out of 2.00

A project has a initial investment of Rs 10 crores.

The after-tax cash flows are Rs 2 crores for 5
years. If the applicable tax rate is 40%, then the
before tax rate of return is

Select one:
a. 0.2
b. 0.3
c. 0.33
d. 0.1

Question 54 Correct Mark 2.00 out of 2.00

A project requires an investment of Rs. 90,000 in

equipment at the start of the project. Annual
cash inflows of Rs. 15,000 (excluding
depreciation) are expected to occur for thenext
ten years. No salvage / scrap value is expected. If
the annual cash inflows occur evenly throughout
the year, the payback period for the project
would be

Select one:
a. 4.8 years
b. 4.5 years
c. 6 years
d. 5.5 years
Question 55 Incorrect Mark 0.00 out of 2.00

Calculate the DSCR given that Profit before tax

Rs 150, tax Rs 40, Depreciation Rs 30, Interest on
term loan Rs 30 and Annual installment of term
loan is Rs 70

Select one:
a. 2.1
b. 1.1
c. 1.5
d. 1.4

Question 56 Incorrect Mark 0.00 out of 2.00

Following details are availabe for a firm:Cash

from operation : 5 croreCash from Investing
activities -ve 4 croreCash from Financing
activities + 12 croresInterest paid during the year
1 croreDebt Repaid Rs 4 CroreNew Borrowings
Rs 5 Crore. Compute the Interst coverage ratio
based on cash flows.

Select one:
a. 0.833333
b. 0.2
c. 1
d. 5
Question 57 Correct Mark 2.00 out of 2.00

The Banks should price their loans and services

such that they will be able to meet

Select one:
a. The interest on deposits
b. All the costs including interest paid on
deposits and the salary paid to the employees
c. All costs such as interest on deposits and
all operating expenses and will also make
some profit
d. All costs such as interest on deposits,
salary paid to the employees and the rent for
premises

Question 58 Correct Mark 2.00 out of 2.00

If PAT is Rs. 73.04 lacs, No. of shares is 57874

and current market value of shares is Rs.
5337.00, what will be the PE ratio of the
company?

Select one:
a. 42.3
b. 45.6
c. 40.8
d. 21.1
Question 59 Correct Mark 2.00 out of 2.00

The closing stock of raw material which is double

the opening stock is Rs. 50 lakh. The annual
purchase is Rs. 120 lakhs. Then the raw material
consumed is

Select one:
a. Rs 70 lakhs
b. Rs 95 lakhs
c. Rs 170 lakhs
d. Rs 100 lakhs

Question 60 Correct Mark 2.00 out of 2.00

Which one of the following is NOT a feature of

Cash Credit?

Select one:
a. Can be availed and repaid any number of
times within the sanctioned limit/drawing
limit
b. Is generally offered against security of
stocks
c. The customer can avail the facility only
by drawing cash
d. The interest is charged only for the
availed portion of the limit