PPTO 2019 CREDIT CONCEPTS PAPER-1

1. What is LLP?(343/18)

a) Limited Liability Partnership

b) Lease Loan payment
c) Lending to limited Partnership
d) All the above
e) None of the above

2. In Capital adequacy ratio calculation CCF denotes (343/18)

a) Credit Conversion factor

b) Controller of credit funding
c) Capital Control facility
d) None of the above
e) Corporate Credit Factor

3. The word Haircut used in calculating value of securities obtained in banks refers to
(343/18)
a) It is trimming of Service charges
b) It is a discount factor or Margin on value of Security due to variation in
Market Value & realizable value.
c) It is a terminology used while extending Project finance
d) only (b) & (c)
e) None of the above

4. The selective credit control is imposed by RBI on banks as per the powers vested to
them by: (342/18)

a) RBI act
b) Essential Service Maintenance act
c) Banking Regulation act
d) Food bill act
e) None of the above

5. What is sales finance?(MOI VOL 2)

a) Financing against bills

b) Financing against book Debts/Receivable
c) Financing against stock
d) Financing against (a) & (b)
e) Financing against (a), (b) & (c)

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6. Can bank finance to Film Industry? (342/18)

a) Banks cannot finance Film Industry as it is a high risk affair

b) Bank can Finance selectively
c) RBI permission is required
d) FEMA Guidelines prohibits it
e) None of the above

7. Along with audited balance sheet, branch has to obtain Form 3CB and Form 3CD
from the auditor to analyze the balance sheet. 3CB & 3CD contains? (342/18)

a) Details of trend in sales

b) Details of Profitability, Net worth Positions
c) Details of Term liabilities, cash accruals, ability to repay term loan commitment
d) All the above
e) None of the above

8. Borrower has to submit CMA data in AF 545R format in the case of Fund based
working capital limits of ………crores and above from banking system(342/18)

a) 2.00 crores
b) 3.00 crores
c) 4.00 crores
d) 5.00 crores
e) None of the above

9. The borrower has to submit QIS Form I (For the previous quarter end) & QIS Form II
(providing half year operating statement funds flow and cash flow statement) in the
case of(MOI VOL 1)

a) Existing borrowers enjoying fund based working capital limit of Rs. 100
lacs and above
b) Existing borrowers enjoying fund based working capital limit of Rs. 200 lacs
and above
c) Existing borrowers enjoying fund based working capital limit of Rs.300 lacs
and above
d) Existing borrowers enjoying fund based working capital limit of Rs.500 lacs
and above
e) None of the above

10. In a balance sheet the components of Long term sources of funds are?(MOI VOL 1)
a) Long Term Loans from banks & FI
b) Share holders fund
c) Current liabilities
d) (a) & (b) only
e) (a),(b) & (c) only
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11. The short term sources in a balance sheet are (MOI VOL 1)

a) Share holders fund

b) The term loans from Financial institutions & Banks
c) Current liabilities only
d) (a) & (c) only
e) (a),(b) & (c) only

12. The long term uses in a balance sheet are (MOI VOL 1)

a) Fixed Assets
b) Non current assets
c) Current assets
d) (a), (b) & (c)
e) (a) & (b) only

13. The CIBIL detect report is obtained for the purpose of

a) To evaluate the credit worthiness of borrower

b) To find out whether the borrower’s name is appearing in the fraudulent
and suspicious activities occurred in banking industry
c) To see the borrowers default amount
d) (a), (b) & (c) are correct
e) None of the above

14. The capability certificate is issued to (47/2016)

a) To corporate entities
b) To Non corporate entities
c) To parents of the students/sponsors pursuing higher education
overseas
d) To NPA customers
e) None of the above

15. What is a fixed obligation to income ratio in a retail rating chart?(343/2018)

a) It is a quantum of amount to be financed in respect of income of the borrower

b) In simple terms it is cutback
c) It is obligation on the part of the borrower to repay the loan
d) All the above
e) None of the above

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16. An account, where a suspicion of fraudulent activity is thrown up by the presence of
one or more early warning signals, is termed as :

a) Suspicious Account
b) Red Flagged Account
c) Fraud Prone Account
d) Stressed Account.
e) Special Monitoring Account.

17. What is subordinate debt of a company? (342/2018)

a) It is debt firstly to be paid by the company in the event of liquidation

b) It is a debt to be repaid by the company after the secured creditors are
paid
c) It will have paripasu charge on the Company Assets
d) All the above
e) None of the above

18. What are the different types of bill finance normally allowed by the bank?(MOI vol 2)

a) Bills purchased
b) Bills discounted
c) Advances (cash credit/overdraft) against bills for collection.
d) Only (a) and (b)
e) (a), (b) and (c)

19. In the case of advances against pledge of goods, what are the requirements to be
fulfilled while accepting goods as security? MOI VOL 2)

a) They should not be perishable goods,and they should be readily marketable

b) Their day today prices are easily ascertainable,and they could be handled
easily and at low cost .
c) They should be acceptable to insurance company to cover fire insurance.
d) (a) and (b) only
e) (a), (b) and (c)

20. For advances against book debts, normally book debts outstanding for over
------------ days should not be taken into account and should be excluded from the
drawing power.(MOI Vol.2)
a) 30
b) 60
c) 90
d) 100
e) 120

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21. Advances granted against supply bills should be brought under----------- MOI VOL 2)

a) DLSB or ODSB
b) OSLSB
c) SODSB
d) (a) and (b) above
e) (a), (b) and (c)

22. In case of advances against immovable property panel lawyer's opinion must be
obtained in four parts. Among the following what is the option that is not relevant in
legal opinion?:

a) Description of the documents produced before lawyer for scrutiny.

b) Description of the property and the extended assessment of land tax, building
tax etc.
c) Flow of title for the past 25 years in the prescribed manner.
d) Confirmation of the validity and marketability of the title and acceptability of the
property for creating mortgage, procedure and method of creating mortgage
e) Marketability of the property

23. What is the margin to be obtained in case of loans against deposits maturing
beyond 2 years out upto 3 years? 343/2018)

a) 5%
b) 10%
c) 15%
d) 20%
e) 25%

24. In terms of Statutory provisions regarding the grant of advances against shares
contained in Sections 19(2) and (3) and 20(1) (a) of the Banking Regulation
Act, 1949, no banking company shall hold shares in any company whether as
pledgee, mortgagee or absolute owner of an amount exceeding------% of the paid up
share capital of the company or -------% of its own paid up capital and reserves,
whichever is less. (342/18)

a) 30, 30
b) 20, 30
c) 50, 50
d) 25, 30
e) 25, 25

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25. Gross working capital is equal to: MOI VOL 1)

a) Total assets
b) Total liabilities
c) Total current assets
d) Total current liabilities
e) (a) and (b) above

26. Negative net working capital implies that: MOI VOL 1)

a) Long-term funds have been used for long term assets

b) Long term funds have been used for current assets
c) Short term funds have been used for fixed assets
d) Short term fund have been used for current assets
e) None of theses

27. Positive net working capital implies that: MOI VOL 1)

a) Liquidity position is not comfortable
b) Current ratio is less than one
c) Current assets are partly financed out of long term sources
d) All the above
e) None of the above

28. In ABC Ltd., current assets are twice that of current liabilities. Net working capital is
Rs.100000. The amount of current assets is: MOI VOL 1)

a) Rs.100000.
b) Rs.200000
c) Rs.300000
d) Rs.400000
e) None of the above

29. which of the following industries generally has lowest level of working capital:
a) Retail shop
b) Chemical manufacturing
c) Aero plane Manufacturing
d) Petroleum
e) All the above

30. Which of the following is classified as current liability(MOI VOL1)

a) Inventory
b) Marketable securities
c) Provision for Tax
d) Investments
e) All the above
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31. Operating cycle is a technique of: MOI VOL 1)

a) Working capital management

b) Receivables Management
c) Inventory management
d) Creditors management
e) None of the above

32 . Which of the following ratios would indicate liquidity shortage:

MOI VOL 1)
a) Gross profit ratio
b) Current ratio
c) Return on net worth
d) Debtors turnover ratio
e) Return on Investment

33. A current ratio is less than one means: MOI VOL 1)

a) Current liabilities<current assets

b) fixed assets > current assets
c) Current assets<current liabilities
d) Share capital>current assets
e) Current assets = current liabilities

34. Which of the following is not required for preparation of fund flow statement: MOI
VOL 1)

a) Current year balance sheet

b) Current year income statement
c) Current year Cash flow statement
d) All the above
e) None of the above

35. Which of the following is not application of fund: MOI VOL 1)

a) Purchase of investment
b) Sale of assets
c) Redemption preferential share capital
d) Payment of dividend
e) All the above
36. In cash flow statement, depreciation is added back because; MOI VOL 1)
a) Depreciation is not a real expense
b) Depreciation is not out flow of cash
c) Depreciation is not tax deductable
d) Depreciation is only estimation
e) None of the above
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37. Definition of cash in the cash flow statement includes: MOI VOL 1)

a) Only cash balances

b) Cash, bank balances, and marketable investments
c) Cash and bank balances
d) Cash, Banks, and debtors
e) None of the above

38. What does Debt Service Coverage Ratio (DSCR) measure: MOI VOL 1)

a) Total borrowing vis-a vis net worth

b) Short term borrowings versus net worth.
c) Total cash generation vis-a vis repayment obligation
d) Capacity to service interest on term borrowings
e) All the above

39. Which of the following statement are true in respect of IRR MOI VOL 1)

a) It is the discount rate that makes NPV of the project equals to zero
b) An investment should be accepted if its IRR is higher than the cost of
capital
c) IRR takes into account time value of money
d) Only (a) and (b) are correct
e) (a), (b) and (c) are correct

40. What does the breakeven point signify ? MOI VOL 1)

a) It is the point of time when cash inflows match cash outflows

b) It is the point of production when there is no profit and no loss
c) It is the point of production when variable costs are equal to fixed cost
d) All the above
e) None of the above

41. The difference between total current assets and current liabilities, other than bank
borrowings is known as; MOI VOL 1)

a) Net working capital

b) Gross working capital
c) Working capital Gap
d) Projected net working capital
e) None of the above

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42. In working capital finance the term MPBF means: MOI VOL 1)

a) Minimum permissible bank finance.

b) Maximum permissible bank finance
c) Modified permitted bank finance
d) None of the above
e) All the above

43. In working capital finance the cash budget statement would comprise of projected
receipts and payments for the next 12 months on account of: MOI VOL 1)

a) Business operations
b) Non business operations
c) Cash flow from capital accounts
d) Sundry items
e) All the above

44. Financing syndication is for the purpose of (342/2018)

a) Overcoming the liquidity problem of the bank

b) Borrower will be comfortable with more number of banks
c) Spreading of risk involved in extending large loans
d) All the above
e) None of the above

45. Total Assets= Rs.20/-; Current Liabilities=Rs.10/- Lac: Capital & Reserves=Rs.4/-
Lac: How much Debt Equity Ratio( MOI VOL 1)
a) 1.80
b) 1.50
c) 1.65
d) 1.75
e) None of the above

46. A deferred payment guarantee is:( MOI VOL 1)

a) Performance Guarantee
b) Financial Guarantee
c) Co-acceptance facility
d) All the above
e) None of the above

47. The LC is opened with security of another LC is: MOI VOL 2)

a) Back to back LC
b) Red clause letter of credit
c) Green clause of letter of Credit
d) Omnibus letter of credit
e) None of the above
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48. Temporary finance provided to a project until long term arrangements are made is
known as.

a) Long term loan

b) Personal loan
c) Infrastructure loan
d) Bridge loan
e) None of the above

49. A statement of showing the forecast of cash receipts, cash disbursements, and net
cash balances over period of time on roll over basis is known as MOI VOL 1)

a) Cash budget
b) Cash flow statement
c) Funds flow statement
d) Capital budgeting
e) None of the above

50. The person in whose favour the guarantee is issued is called MOI VOL 2)

a) Issuer
b) Banker
c) Indemnifier
d) Guarantor
e) Beneficiary

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 PPTO 2019 KEY TO CREDIT CONCEPTS PAPER-I

1 a 11 c 21 a 31 a 41 c
2 a 12 e 22 e 32 b 42 b
3 b 13 b 23 c 33 c 43 e
4 c 14 c 24 a 34 c 44 c
5 d 15 b 25 c 35 b 45 b
6 b 16 b 26 c 36 b 46 b
7 d 17 b 27 c 37 b 47 a
8 a 18 e 28 b 38 c 48 d
9 a 19 e 29 a 39 e 49 a
10 d 20 c 30 c 40 b 50 e

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