CFI CBCA Core Course Assessments &
Quizzes Latest Update (2024/2025)
Already Graded A
Why is cash flow analysis important in credit assessment?
✔✔Cash flow analysis helps determine a borrower’s ability to meet debt obligations by
evaluating income, expenses, and liquidity.
What is the significance of financial ratios in credit analysis?
✔✔Financial ratios provide insights into a company’s profitability, liquidity, efficiency, and
solvency, helping assess financial health.
How does revenue recognition impact financial statements?
✔✔Revenue recognition determines when and how revenue is recorded, affecting profitability
and cash flow representation.
What is the difference between operating and non-operating income?
✔✔Operating income comes from core business activities, while non-operating income arises
from secondary sources like investments or asset sales.
1
,Why is working capital management essential for a business?
✔✔Effective working capital management ensures a company has sufficient short-term assets to
cover liabilities and sustain operations.
What is the purpose of stress testing in credit analysis?
✔✔Stress testing evaluates how a borrower’s financial position would perform under adverse
economic conditions to gauge credit risk resilience.
How does leverage affect a company's financial stability?
✔✔High leverage increases financial risk by raising debt obligations, whereas low leverage
provides more financial flexibility.
What is the role of EBITDA in financial analysis?
✔✔EBITDA measures a company’s earnings before interest, taxes, depreciation, and
amortization, offering a clearer view of operational performance.
Why do credit analysts adjust financial statements?
2
,✔✔Adjustments help normalize financials by removing non-recurring items, providing a more
accurate assessment of a borrower’s creditworthiness.
How do economic cycles influence credit risk?
✔✔During economic downturns, credit risk increases due to reduced revenues and higher default
probabilities, while strong economies improve repayment capacity.
What is the significance of debt service coverage ratio (DSCR)?
✔✔DSCR assesses a borrower’s ability to cover debt obligations using operating income,
helping determine creditworthiness.
How does inventory turnover ratio impact liquidity?
✔✔A high turnover ratio indicates efficient inventory management, while a low ratio suggests
potential liquidity issues or excess stock.
Why is industry benchmarking important in credit assessment?
✔✔Comparing financial performance to industry peers helps assess competitiveness and identify
strengths and weaknesses.
3
, What is the purpose of conducting a sensitivity analysis?
✔✔Sensitivity analysis evaluates how financial performance changes under different
assumptions, helping assess potential risks.
How do covenants protect lenders in a loan agreement?
✔✔Covenants set financial and operational restrictions to ensure borrowers maintain stability
and reduce default risk.
What role does a borrower's management team play in credit assessment?
✔✔A strong management team improves operational efficiency and financial decision-making,
reducing business risk.
Why is historical financial performance relevant in credit analysis?
✔✔Past performance trends help predict future financial stability and assess repayment capacity.
How does seasonality affect a company’s cash flow?
✔✔Seasonal fluctuations impact revenue and expenses, requiring businesses to plan for cash
flow variability.
4
Quizzes Latest Update (2024/2025)
Already Graded A
Why is cash flow analysis important in credit assessment?
✔✔Cash flow analysis helps determine a borrower’s ability to meet debt obligations by
evaluating income, expenses, and liquidity.
What is the significance of financial ratios in credit analysis?
✔✔Financial ratios provide insights into a company’s profitability, liquidity, efficiency, and
solvency, helping assess financial health.
How does revenue recognition impact financial statements?
✔✔Revenue recognition determines when and how revenue is recorded, affecting profitability
and cash flow representation.
What is the difference between operating and non-operating income?
✔✔Operating income comes from core business activities, while non-operating income arises
from secondary sources like investments or asset sales.
1
,Why is working capital management essential for a business?
✔✔Effective working capital management ensures a company has sufficient short-term assets to
cover liabilities and sustain operations.
What is the purpose of stress testing in credit analysis?
✔✔Stress testing evaluates how a borrower’s financial position would perform under adverse
economic conditions to gauge credit risk resilience.
How does leverage affect a company's financial stability?
✔✔High leverage increases financial risk by raising debt obligations, whereas low leverage
provides more financial flexibility.
What is the role of EBITDA in financial analysis?
✔✔EBITDA measures a company’s earnings before interest, taxes, depreciation, and
amortization, offering a clearer view of operational performance.
Why do credit analysts adjust financial statements?
2
,✔✔Adjustments help normalize financials by removing non-recurring items, providing a more
accurate assessment of a borrower’s creditworthiness.
How do economic cycles influence credit risk?
✔✔During economic downturns, credit risk increases due to reduced revenues and higher default
probabilities, while strong economies improve repayment capacity.
What is the significance of debt service coverage ratio (DSCR)?
✔✔DSCR assesses a borrower’s ability to cover debt obligations using operating income,
helping determine creditworthiness.
How does inventory turnover ratio impact liquidity?
✔✔A high turnover ratio indicates efficient inventory management, while a low ratio suggests
potential liquidity issues or excess stock.
Why is industry benchmarking important in credit assessment?
✔✔Comparing financial performance to industry peers helps assess competitiveness and identify
strengths and weaknesses.
3
, What is the purpose of conducting a sensitivity analysis?
✔✔Sensitivity analysis evaluates how financial performance changes under different
assumptions, helping assess potential risks.
How do covenants protect lenders in a loan agreement?
✔✔Covenants set financial and operational restrictions to ensure borrowers maintain stability
and reduce default risk.
What role does a borrower's management team play in credit assessment?
✔✔A strong management team improves operational efficiency and financial decision-making,
reducing business risk.
Why is historical financial performance relevant in credit analysis?
✔✔Past performance trends help predict future financial stability and assess repayment capacity.
How does seasonality affect a company’s cash flow?
✔✔Seasonal fluctuations impact revenue and expenses, requiring businesses to plan for cash
flow variability.
4
