BANK CREDIT MID-TERM

Class: 211_FIB3024-E-1
Duration: 90 mins
Part A: Multiple choice questions
1. What are the three main principles applied to corporate lending proposals? (1 point)
A. Capital, Suitability, Capacity
B. Safety, Suitability, Capacity
C. Safety, Suitability, Profitability
Đáp án là: C
2. The first step in the assessment of personal loans is: (1 point)
A. Obtaining prescribed application form
B. Determine interest, fees and charges
C. Conduct credit checks
Đáp án là: A
3. Which of the following is TRUE about 5’Cs credit? (1 point)
A. Character, Capacity, Capability, Conditions, Capital
B. Commitments, Capacity, Capability, Conditions, Collateral
C. Character, Capacity, Capital, Conditions, Collateral
Đáp án là: C
Part B: Exercises

1. (2 points) Imagine the current assets and current liabilities of a firm are $3,200 and
$2,000 respectively. How much can the firm borrow on a short-term basis without
reducing the current ratio below 1.5?
- Firm can borrow = 3200/1.5 – 2000 = 133.3 $

2. (5 points) Bank A receives an application from a retailing company B that requires a $10
million loan to develop a shopping center store. The company is listed on Hochiminh
Stock Exchange and is well recognized and established. The company’s credit rating is A
and its bonds are trading at 7.5 percent, and the average share price for the period was
$3.75.
The condensed financial information of the company is provided as follow:

Total current assets $588,015,000

Total noncurrent assets $569,749,000
Total assets $1,157,764,000
Total current liabilities $403,930,000
Total noncurrent liabilities $203,608,000
Total liabilities $607,538,000
Shareholders’ equity $550,326,000
Retained earnings $278,893,000
 Number of shares on issues 142,869,000

Profit before tax was $173,897,000 on sales of $521,566,000, which continued the
increased profitability of the company. As part of current assets, inventory was
$61,001,000.
Based on the above financial information, compute the liquidity ratio, efficiency ratio,
profitability ratio, and leverage ratio, then comment on financial condition of Company
B.

Answer

Liquidity ratio
Current ratio = Current Assets/ Current liabilities = 1.46
Quick Ratio = (current asset – inventory)/ Current liabilities = 1.3

Efficiency ratio

Equity return over = 0.94

Fix asset return over = 0.9
Asset turnover ratio = Net Sales/average total asset = 0.45

Profitability ratio

Net profit margin = Net income / Sales = 0.33

ROA = Net income/ total asset = 0.15
ROE = Net income/ total equity = 0.32

Leverage ratio

Total debt ratio = (total asset - total equity )/ total asset = 0.52
Debt/equity = total debt/total equity = 1.10
Equity multiplier = total asset / total equity = 2.10

So The company's payout ratio is not very high.