10/28/2018 EOM I: TEST

National Institute of
Bank Management

Dashboard  My courses  CRD MGMT  MODULE I : BASICS OF CREDIT

AND CREDIT PROCESS  EOM I: TEST

Started on Sunday, 28 October 2018, 9:52 AM

State Finished
Completed on Sunday, 28 October 2018, 10:30 AM
Time taken 37 mins 31 secs
Grade 51.00 out of 60.00 (85%)

Question 1 Correct Mark 0.50 out of 0.50

Agricultural Allied activities do not include

Select one:

a. Poultry Farming

b. Dairy Farming

c. Animal Husbandry

d. Cultivation of Sugar cane

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Question 2 Correct Mark 0.50 out of 0.50

Composite Loan means

Select one:

a. Combination of Fund based and Non-fund based

nance

b. Combination of Pre sale and Post sale Working

Capital nance

c. Combination of Term Loan and Deferred

Payment Guarantee

d. Combination of Term Loan and Working Capital

nance

Question 3 Correct Mark 0.50 out of 0.50

Current ratio, Quick Ratio and Cash Ratio are

Select one:

a. Leverage ratios

b. Coverage ratios

c. Turnover ratios

d. Liquidity ratios

Question 4 Correct Mark 0.50 out of 0.50

Debt-to Equity ratio and Total Outside Liabilities to-

Equity ratio (TOL/TNW) are

Select one:

a. Coverage ratios

b. Leverage ratios

c. Turnover ratios

d. Pro tability ratios

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Question 5 Correct Mark 0.50 out of 0.50

For which one of the following categories the Banks do

"NOT" o er Credit?

Select one:

a. Agriculture

b. Infrastructure

c. Speculation

d. International Trade

Question 6 Correct Mark 0.50 out of 0.50

In a common size P & L Statement, which one of the

following variable is presented at 100?

Select one:

a. Sales

b. Net pro t

c. Operating pro t

d. Cost of goods sold

Question 7 Correct Mark 0.50 out of 0.50

In case of a Partnership Firm, which one of the following

is "NOT TRUE"?

Select one:

a. There must be an agreement among the partners

b. Partnership is an association of two or more

persons

c. Pro t earned by the partnership rm should be

shared by all partners

d. Banks lend money to an Unregistered

partnership rm

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Question 8 Correct Mark 0.50 out of 0.50

Net Operating Cycle is equal to

Select one:

a. Inventory period + Receivable Period – Creditor

Period

b. Inventory period - Receivable Period + Creditor

Period

c. Inventory period + Receivable Period

d. Inventory period + Receivable Period + Creditor

Period

Question 9 Correct Mark 0.50 out of 0.50

One of the following does "NOT" represent popular

"Seven Cs"in Credit

Select one:

a. Commitment

b. Capacity

c. Courage

d. Character

Question 10 Correct Mark 0.50 out of 0.50

Presentation of an LC is said to be complying with the

requirements when it is

Select one:

a. In accordance with LC terms and conditions

b. Presenting all shipping documents

c. Any of the given options

d. Well within LC validity period

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Question 11 Correct Mark 0.50 out of 0.50

Principle of Pro tability "in lending and investment of the

Bank means:

Select one:

a. Such lending and investment should increase

salary of the employees of the Bank

b. Such lending should generate surplus (pro t) for

the Borrower

c. Such lending and investment should generate

surplus (pro t) for the Bank's sustenance in the long
run

d. Such investment should generate surplus (pro t)

for the entity in which the investment is made

Question 12 Correct Mark 0.50 out of 0.50

Principle of Purpose of Loan" aims that the lending by

the Banks is "NOT" for one of the following purposes

Select one:

a. Production of Services

b. Speculative Purpose

c. Production of Goods

d. Purchase of Consumer durables

Question 13 Correct Mark 0.50 out of 0.50

Retail Loans o ered by Banks do not include

Select one:

a. Finance for Purchase of Residential house

b. Finance for Purchase of Car

c. Finance for purchase of residential plot

d. Finance for Purchase of Truck

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Question 14 Incorrect Mark 0.00 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 nancial standing of the borrower

c. The character of the borrower

d. The capacity of the borrower to repay

Question 15 Incorrect Mark 0.00 out of 0.50

Which of the following is a feature of a demand loan?

Select one:

a. Term loans

b. Loans for meeting working capital needs and that

can be called back by the lender

c. Loan that can be called back by the lender

anytime

d. O ered normally for meeting working capital

requirements

Question 16 Correct Mark 0.50 out of 0.50

Which one of the following has net pro t as the basis of

calculation?

Select one:

a. Internal Rate of Return

b. Payback Period

c. Net Present Value

d. Average Rate of Return

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Question 17 Correct Mark 0.50 out of 0.50

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

for Agriculture?

Select one:

a. Finance for purchase of seeds

b. Finance for purchase of fertilisers

c. Finance for purchase of pump set

d. Finance for purchase of pesticides

Question 18 Correct Mark 0.50 out of 0.50

Which one of the following is a non fund based credit?

Select one:

a. Term loan

b. Bill discounting

c. Cash credit

d. Letter of credit

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. Payment to suppliers

b. Opening balance of cash

c. Collection from customers

d. Account revievables

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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 nance?

Select one:

a. Performance Guarantee

b. Import Letter of Credit

c. Deferred Payment Guarantee

d. Inland Letter of Credit

Question 21 Incorrect Mark 0.00 out of 1.00

A company sells an old equipment for Rs 20 million,

whereas its book value is Rs 3 million. This transaction
would e ect which parts of cash ow statement?

Select one:

a. Investing activities only

b. Financing and investing activities

c. Operating and nancing activities

d. Operating activities only

Question 22 Correct Mark 1.00 out of 1.00

Bridge Loan is sanctioned

Select one:

a. generally for a period of not less than ve years

b. as an interim nance for a short period of time

until the borrower is able to raise long term nance

c. for construction of bridges

d. for repairs and renovation of old bridges

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Question 23 Correct Mark 1.00 out of 1.00

Credit Administration functions does "NOT" include

Select one:

a. De ning the standards of customer service

b. Making and implementing Credit Policy

c. Credit monitoring and supervision

d. Deciding Lending Authority

Question 24 Incorrect Mark 0.00 out of 1.00

Discount rate for determining the NPV of a project is

Select one:

a. Rate of interest payable on bank loan taken for

the project

b. Cost of equity capital

c. The depreciation rate of the xed assets in the

project

d. The weighted average cost of capital for the

project

Question 25 Correct Mark 1.00 out of 1.00

DSCR indicates the adequacy of project cash ows to

service

Select one:

a. Interest on working capital loans

b. Interest on working capital and term loans

c. Interest on term loans

d. Installment and Interest on term loans

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Question 26 Correct Mark 1.00 out of 1.00

Gross Pro t Margin ratio is calculated as

Select one:

a. Gross Pro t/Net Sales x 100

b. Net Pro t/Gross Sales x 100

c. Net Pro t/Net Sales x 100

d. Gross Pro t/Gross Sales x 100

Question 27 Incorrect Mark 0.00 out of 1.00

In case of a Joint Stock Company, which one of the

following is "NOT TRUE"?

Select one:

a. Incorporation and Registration under Companies

Act is optional

b. It could be a Public Company, Private Company

or a Government Company

c. It is a legal entity

d. It has perpetual succession

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Question 28 Incorrect Mark 0.00 out of 1.00

In case of a Sole Proprietorship Firm, the liability of the

Sole Proprietor is

Select one:

a. Unlimited and lenders will have recourse not only

to the assets employed in his business but also to the
personal assets of the Proprietor

b. Limited and Lenders will have recourse only to

the assets employed in his business

c. Unlimited and lenders will have recourse not only

to the assets employed in his business but also to the
self acquired personal assets of the Proprietor

d. Unlimited and lenders will have recourse not

only to the assets employed in his business but also to
the private assets of the Proprietor which are charged
to the Bank

Question 29 Correct Mark 1.00 out of 1.00

In case of borrowing by the Karta on behalf of HUF, the

liability of Coparceners is

Select one:

a. Limited to the extent of their share in the

property

b. As speci cally agreed upon in the loan

agreement

c. Is unlimited and they are personally liable

d. As speci cally decided by the Karta

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Question 30 Correct Mark 1.00 out of 1.00

In respect of borrowers under the category "Individuals",

which one of the following is NOT TRUE?

Select one:

a. A natural/legal guardian can borrow on behalf of

a minor

b. A married woman can borrow provided she has

independent means

c. An Illiterate person can not borrow

d. A purdanashin woman can borrow 

Question 31 Correct Mark 1.00 out of 1.00

In respect of Project Finance, which of the following is

"NOT TRUE"?

Select one:

a. Considered to be less risky due to availability of

tangible security

b. Generally sanctioned by Financial Institutions

c. Normally provided in the form of Term Loans

d. Usually sanctioned for very long term

Question 32 Correct Mark 1.00 out of 1.00

Interest coverage ratio refers to the ability of a borrower

to pay

Select one:

a. Interest and principal from out of net pro t

b. Interest from out of his operating pro t

c. Interest and principal from out of his operating

pro t

d. Interest from out of his net pro t

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Question 33 Incorrect Mark 0.00 out of 1.00

Risk in Lending by Banks is fairly diversi ed only by

Select one:

a. Providing credit to various sections of the Society

b. Providing credit to many sectors and to a large

number of customers in various sections of the
society

c. Providing credit to many sectors and to a large

number of customers of di erent age group in various
sections of the society

d. Providing credit to customers of di erent age

groups

Question 34 Correct Mark 1.00 out of 1.00

Since lending is a risk taking business, banks need to

Select one:

a. lend only to Central Government Corporations

b. lend only to the bene ciaries of Government

Sponsored schemes.

c. lend only to State Government Corporations

d. have robust Risk Management Systems in place

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Question 35 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 methods of Assessment of

Credit

d. Guidelines on the Loan to Value

Question 36 Correct Mark 1.00 out of 1.00

The indirect method for preparing a cash ow statement

for operating activities begins with

Select one:

a. Total expenditure

b. Total Income

c. Sales

d. Pro t

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Question 37 Correct Mark 1.00 out of 1.00

The safety of lending means and includes that

Select one:

a. the borrowers' business operates without any

risk

b. the money lent by the Bank is repaid by the

Borrowers with agreed Interest, as per agreed
schedule of Repayment.

c. the borrowers' life is safe

d. the money lent by the Bank is repaid by the

Borrower in lump sum on demand, irrespective of the
agreed repayment schedule.

Question 38 Correct Mark 1.00 out of 1.00

Which one of the following allows analysing the e ect of

changing a single variable at one time?

Select one:

a. Cash ow Analysis

b. Sensitivity Analysis

c. Financial Analysis

d. Scenario Analysis

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Question 39 Correct Mark 1.00 out of 1.00

A "Brown eld" project refers to investments made in

Select one:

a. Setting up a new factory or a plant in a new

location

b. Expansion or modernisation of existing facilities

c. Starting a new rm along with setting up new

manufacturing and other facilities

d. All the given options

Question 40 Correct Mark 1.00 out of 1.00

Which one of the following is "NOT TRUE" regarding the

Term Loan facility o ered by Banks?

Select one:

a. Term Loans are to be repaid in speci ed number

of instalments

b. Term Loans are sanctioned for a speci ed period

c. Term Loans are sanctioned only to business

persons for productive purpose

d. Term Loans are generally sanctioned for

creating/ acquiring assets

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Question 41 Incorrect Mark 0.00 out of 1.00

Which one of the following is "NOT TRUE" regarding

Working Capital nance?

Select one:

a. Working Capital nance is sanctioned for meeting

the gap in the cash ow between purchase of raw
material and collection of sale proceeds from the
customers

b. Working Capital nance is sanctioned for

acquiring furniture and xtures in a shop

c. Working Capital nance is sanctioned for a period

not less than three years

d. Working Capital nance is sanctioned for

investment in new business by the borrower

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 de nes the Authority and Responsibility

attached to functionary in credit
departments/branches

b. It is explicit about the Risk management

c. It should be updated periodically (normally

annually).

d. It should be approved by RBI

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Question 43 Incorrect Mark 0.00 out of 1.00

Which one of the following is "NOT" an objective of

Credit Policy of Banks?

Select one:

a. Ensure adequate increase in deposits of the Bank

b. Ensure that the credit functions are within the

Regulatory Prescriptions, Social Responsibilities and
Corporate Goals

c. Provide direction and guidance for credit function

of the Bank

d. Ensure healthy balance between volume of

credit, asset quality and earnings

Question 44 Correct Mark 1.00 out of 1.00

Which one of the following is "NOT" covered under the

Marginal Cost based Lending Rate(MCLR) of a bank?

Select one:

a. Cost of funds

b. Dividend to shareholders

c. Risk costs

d. Operating costs

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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 interest from the date of

Discounting of the Bill till realisation of the same

b. Banks charge Commission and Interest on

purchase of the Demand Bills

c. Banks charge Commission and Interest on

discounting of the Usance Bills

d. It is a facility to provide credit against receivables

Question 46 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 fertilisers

b. Finance for purchase of irrigation system

c. Finance for purchase of a tractor

d. Finance for purchase of harvesting machine

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Question 47 Correct Mark 1.00 out of 1.00

Which one of the following is "NOT"applicable to

Demand Loan?

Select one:

a. The "call option" can be exercised by the Bank

only with the consent of the borrower

b. This loan can be called back by the Bank anytime

c. This loan is normally sanctioned to meet Working

Capital requirements

d. Drawing money from the demand Loan by

cheque is not allowed

Question 48 Correct Mark 1.00 out of 1.00

Which one of the following is "TRUE" regarding

Partnership Firms?

Select one:

a. The business of the Partnership rm MUST be

conducted by all

b. Partnership agreement need not be necessarily

for carrying out of a Business

c. As per law, a partnership rm need not be

compulsorily registered

d. Pro t earned by the Partnership Firm should be

shared equally amongst the partners.

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Question 49 Correct Mark 1.00 out of 1.00

Which one of the following is not a cash ow from

operating activities?

Select one:

a. Cash from sales of nished goods

b. Cash from new investors

c. Dividend from subsidiaries

d. Cash paid to suppliers

Question 50 Correct Mark 1.00 out of 1.00

Which one of the following is the "MOST" important

reason for Banks to follow the "Principle of Safety" in
lending?

Select one:

a. To safe guard the business of the borrowers of

Commercial Loans from the Bank.

b. To safeguard the Directors of the Bank from

Accountability.

c. To safeguard the employment 0f the Employees

d. To safeguard the con dence of the Depositors

that the money deposited will be safe

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Question 51 Correct Mark 2.00 out of 2.00

Following details are availabe for a rm:

Cash from operation : 5 crore

Cash from Investing activities -ve 4 crore

Cash from Financing activities + 12 crores

Interest paid during the year 1 crore

Debt Repaid Rs 4 Crore

New Borrowings Rs 5 Crore. 

Compute the Interst coverage ratio based on cash ows.

Select one:

a. 0.833333

b. 5

c. 1

d. 0.2

Question 52 Correct Mark 2.00 out of 2.00

Following details are availabe for a rm:

Cash from operation : 5 crore

Cash from Investing activities -ve 4 crore

Cash from Financing activities + 12 crores

Interest paid during the year 1 crore

Debt Repaid Rs 4 Crore

New Borrowings Rs 5 Crore. 

Compute the debt service coverage ratio based on cash

ows.

Select one:

a. 0.2

b. 5

c. 1

d. 0.833333

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Question 53 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 54 Correct Mark 2.00 out of 2.00

If the Current ratio of a company is 1.33 and stock value

is Rs. 600000, what will be the Quick ratio if current
liabilities are Rs. 900000?

Select one:

a. 0.66

b. 0.9

c. 0.75

d. 0.6

Question 55 Correct Mark 2.00 out of 2.00

In respect of an Attorney, which one of the following is

"TRUE" ?

Select one:

a. Power vested with the attorney is restricted to

the activities mentioned in the PA document

b. Joint Stock Companies cannot appoint attorney

c. Limited Liability partnerships cannot appoint

attorney

d. Power vested with the attorney is not restricted

to the activities mentioned in the PA document

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Question 56 Correct Mark 2.00 out of 2.00

The "Principle of Liquidity" means:

Select one:

a. Bank must keep su cient cash and be able to

meet the demand for cash withdrawal by depositors
on demand.

b. Bank Branches should keep cash in the branch

equal to or not less than total current account deposit
of the branch.

c. Bank Branches should keep cash in the branch

equal to or not less than total savings bank deposit of
the branch.

d. Bank Branches should keep cash in the branch

equal to or not less than total current account and
savings bank deposit of the branch.

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. All the costs including interest paid on deposits

and the salary paid to the employees

b. All costs such as interest on deposits and all

operating expenses and will also make some pro t

c. The interest on deposits

d. All costs such as interest on deposits, salary paid

to the employees and the rent for premises

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Question 58 Correct Mark 2.00 out of 2.00

To maintain the adequate "liquidity "of the Banks, RBI

has made it mandatory to:

Select one:

a. deposit and maintain an amount equal to or not

less than the total savings bank deposit of the Bank
with the RBI

b. maintain a certain amount deposited with the

RBI and a certain amount invested in very safe and
easily encashable securities.

c. deposit and maintain an amount equal to or not

less than the total current account deposit of the Bank
with the RBI

d. deposit and maintain an amount equal to or not

less than the total demand deposit of the Bank with
the RBI

Question 59 Correct Mark 2.00 out of 2.00

Which one of the following is NOT a feature of Cash

Credit?

Select one:

a. The interest is charged only for the availed

portion of the limit

b. Can be availed and repaid any number of times

within the sanctioned limit/drawing limit

c. The customer can avail the facility only by

drawing cash

d. Is generally o ered against security of stocks

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Question 60 Correct Mark 2.00 out of 2.00

A rm 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 4.0 lac

b. Rs 5.0 lac

c. Rs 3.5 lac

d. Rs 4.5 lac

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