Skills Assessment

Question 1

The four basic types of financial statements are:

Answer 1

c. The Income Statement, Balance Sheet, Statement of Retained Earnings, Statement of Cash Flows.

Question 2

The highest professional standard of a financial statement preparation is:

Answer 2

d. The CPA audited statement.

Question 3

There are four different types of audit reports and opinions that may result:

Answer 3

a. An unqualified, qualified, adverse, and disclaimer audit report.

Question 4

An “unqualified” report is:

Answer 4

c. All of the above.

Question 5

The income statement represents:

Answer 5

d. All of the above.

Question 6

The accounting “Realization Principle” defines:

Answer 6

d. Both b. and c.

Question 7

The “Matching Principle” states that expenses must be recognized in the period in which the products or services were:

Answer 7

a. Produced and delivered to customers and included in the sales revenue total for the fiscal period reported.

Question 8

The components of the income statement include:

Answer 8

d. All of the above.

Question 9

Two of the primary depreciation methods businesses may use are:

Answer 9

c. Straight-line and accelerated.

Question 10

Of the LIFO and FIFO inventory valuation methods, the FIFO method reflects a more realistic view of how inventory is sold.

Answer 10

a. True.

Question 11

Other Expenses are those:

Answer 11

a. Not related to the core business activities.

Question 12

Which of the following is not a Current Asset?

Answer 12

b. Accounts Payable.

Question 13

Accounts receivable (AR) represents:

Answer 13

e. Only a. and b.

Question 14

Accounts Receivable and Inventory “Days on hand” or “day’s turnover” measures:

Answer 14

b. How many days it takes a business to collect its accounts receivable sales or convert inventory to cash.

Question 15

Which of the following are Current Liabilities?

Answer 15

d. All of the above.

Question 16

Past due payments on Account Payable to trade creditors are:

Answer 16

e. Only a. and b.

Question 17

The current portion of long-term debt (CPLTD) captures which of the following:

Answer 17

a. The principal portion of the long-term debt payments that is due in the next twelve months.

Question 18

Long-term assets are listed at their “gross fixed asset value,” meaning the original cost at which they were acquired by the business. Listing this amount is associated with which accounting principle?

Answer 18

b. The Original Transaction Value Principle.

Question 19

With regard to its buildings and improvements, and furniture and fixtures, the gross fixed asset value is reduced by:

Answer 19

a. Accumulated depreciation.

Question 20

Analysts and lenders generally request a “detailed debt schedule” of all long-term obligations from a business, which includes:

Answer 20

d. All of the above.

Question 21

With regard to Owner’s Equity, corporations show the components of owner’s equity primarily as:

Answer 21

a. Common stock, but may also include special (and sometimes preferred stock) and retained earnings.

Question 22

Which of the following best describes attributes of a Sole Proprietorship:

Answer 22

a. Owned by an individual who bears total risk and liability.

Question 23

Weaknesses of Sole Proprietorships include:

Answer 23

d. All of the above.

Question 24

The two types of Partnerships are:

Answer 24

c. General and Limited.

Question 25

Which of the following are true for corporations?

Answer 25

e. All of the above.

Question 26

A limited liability company:

Answer 26

b. Have owners who are called “members.”

Question 27

Business entities that protect owners from personal liability are:

Answer 27

a. LLP’s, LLC’s and Corporations.

Question 28

The highest risk business “life cycles” are:

Answer 28

a. New, Emerging and Deterioration.

Question 29

Aside from a business entity’s life cycle position, what must lenders know?

Answer 29

c. The business entity’s industry life cycle position.

Question 30

For a sole proprietor business owner to embrace an “early warning” mentality, she/he must evaluate:

Answer 30

a. The Product/Service viability, then the economic, competitive, market share and life cycles risk environments.

Question 31

Which regulations prohibit “redlining”?

Answer 31

d. The Community Reinvestment Act.

Question 32

Prohibition of discrimination in lending on the basis of race, color, marital status, sex and national origin is centered in:

Answer 32

c. Regulation B.

Question 33

The underpinnings of lending to creditworthy borrowers encompass which of the following for lenders:

Answer 33

d. All of the above.

Question 34

The 5 C’s of Credit include:

Answer 34

a. Character, Capacity, Conditions, Capital and Collateral.

Question 35

The Four Step analytical process is:

Answer 35

b. Context, Numbers, Testing and Decision.

Question 36

Contextual analysis in the Four Step analytical process includes:

Answer 36

f. All of the above.

Question 37

A “creditworthy borrower” is:

Answer 37

a. An individual or business that a comprehensive analysis demonstrates will be able to pay in full all bank and financial obligations according to terms granted without default.

Question 38

If a business’s Return on Assets trend from 2017 to 2019 was 1.75:1, 1.25:1, and 1:1, the trend shows:

Answer 38

c. Deterioration.

Question 39

Working Capital represents:

Answer 39

d. Both a. and b.

Question 40

Special Credits Officers handle loans that are experiencing stress, past due payments, or potentially may default. Their primary role is:

Answer 40

d. All of the above.

Question 41

What is the primary role of Special Credits Officers?

Answer 41

Dedicated foremost to helping the business management correct its deficiencies and restore debt service capacity. ## Footnote They look for solutions to performance issues, as rehabilitation of the credit is preferred. Try to avoid liquidating collateral to repay the bank’s obligations.

Question 42

What do Credit Approval and Credit Administrators provide?

Answer 42

Provide a “second level approval” if above a lender’s lending authority.