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CLFP - Credit WITH 100- SURE ANSWERS.
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10/5/24, 8:11 AMEUNICE
CLFP – Credit WITH 100% SURE ANSWERS
Terms in this set (53)
Fundamentally, _____ risk is the chance of Credit
not receiving money back in a timely
manner and as agreed.
What is considered the process in lending Underwriting
that determines the acceptability of a
proposed transaction based on the
inherent risk of the deal and the lender's or
lessor's credit policies?
The role of a credit analyst in an equipment Five
finance company is to make decisions
within the parameters of an organization's
risk appetite. The ultimate question to be
answered: does the transaction make
sense? Considering the ___ "Cs" of credit
can help in answering these questions.
One way to think about credit in a lending Risk appetite
organization is within the context of a
" ______ " framework of which credit policy
is a component. This framework is a
foundation for making decisions.
The following equation is used to Probability of Default (PD), provides an estimate of the likelihood that a borrower will
determine the expected loss: be unable to repay debt obligations.
% PD * LGD * EAD = Expected Loss
In this equation, what does 'PD' refer to?
Although each company may define these Transactions over $5,000,000
ranges slightly different, a large-ticket
transaction is generally considered as the
following:
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, 10/5/24, 8:11 AM
What type of transactions are often credit Small-ticket transactions
scored and may also use automatic credit
decisions?
The level of due diligence for a credit - The origination channel (source of business).
evaluation will likely vary based on what - The size of the transaction.
factors? - The risk appetite framework of the lessor/lender.
Knowing the origination channel is The inherent risk in various origination channels.
important when evaluating credit. The most
important reason to know where a
transaction is coming from is ________ _.
With _____ , the lender/lessor is directly Direct origination;
interacting with the end-user customer. Third-Party Origination
With _____ , the lender/lessor is once
removed from the end-user customer and
relies on the originator for much of the
customer interaction.
An additional level of due diligence for the Source credit approval process
third-party origination channel and the
vendor origination channel is.
What does "KYC" stand for? Know Your Customer
- Understand the entity
- Identify owners
- Balance of Due Diligence vs Cost vs Risk
KYC - Know Your Customer
- Background checks avoid terrorist activity
- Fraud Prevention
- Know the entity type (Corp, LC, Sole Prop, etc.)
- Credit Bureaus
Credit professionals use a wide variety of
- Credit Scores
tools to evaluate credit and select the
- Financial Statement Analysis
appropriate tools for analysis based on the
- Non Traditional Data Sources
type and size of transactions. These include
- Risk Ratings and Risk Scores
the following:
- Industry Peer Comparison
Credit professionals may use a wide variety - Social Media
of non-traditional data sources to evaluate - Internet Searches
credit. - Industry-Specific Online Sources
- Traditional - Historic profits plus non cash expenses
Types of Cash Flow Analysis - Cash Throw Off - Changes in balance sheet accounts
- Global Cash Flow Analysis - Global comparison
In addition to current ratios and cash flow Three or four-year (Trend Analysis)
calculations, credit analysts should
evaluate trends over a __________ period.
Although it is important to note changes
year over year, any trend analysis done
with less information is considered very
limited.
- Return on Sales
- Net Profit Margin
Increasing ratios that reflect positive trends
- Current Ratio
- Quick Ratio
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