Business Credit Management Quiz

What is defined as the risk that a borrower will default in its repayment obligations?

• Operational risk

• Credit risk

• Market risk

• Liquidity risk

What is the responsibility of a Credit Officer in pursuing business opportunities?

• Maximizing operational costs

• Ignoring borrower's credit risk

• Minimizing risk of loan losses

• Avoiding credit evaluation

Which risk factor involves the daily operating cycle of a business?

• Manufacturing process and production cycle risk

• Supply risk

• Product risk

• Customer/sales and distribution risk

What does the analysis of product risk involve?

• Supply availability risk

• Obsolescence risk

• Outsourcing risk

• Credit term risk

How can lenders mitigate industry demands risk?

• By structuring longer loan tenures

• By avoiding lending to mature industries

• Through ongoing research and product innovation

• By ignoring industry regulations

What is important for lenders to assess in terms of management risk?

• Product uniqueness

• Market share

• Revenue growth

• Corporate culture

What is a key success factor for a borrower's business competitiveness?

• Quality of products

• Industry regulations

• Number of competitors

• Length of credit terms

How can lenders mitigate external factors risk?

• By avoiding financial capacity

• By ignoring technological changes

• By controlling political stability

• Through forward planning

What are the two most common ownership conflict risks faced by a company?

• Operational risk and compliance risk

• Shareholder/management squabbles and management succession risk

• Financial risk and market risk

• Credit risk and liquidity risk

What is the purpose of taking collateral in banking?

• To reduce the loan amount

• To mitigate credit risk for the lender

• To provide comfort to the borrower

• To increase the interest rate on loans