Assessment - Credit Analysis & Risk Management (Carm) MBA-4th Semester Lmtsm

The statement of equity is not one of the three main financial statements. The three main financial statements are the balance sheet, income statement, and cash flow statement. The balance sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time. The income statement shows a company's revenues, expenses, and net income over a period of time. The cash flow statement reports the cash inflows and outflows from operating, investing, and financing activities. However, the statement of equity focuses specifically on changes in a company's equity over a period of time and is not considered one of the main financial statements.

LTV stands for Loan to Value ratio. This ratio is used by lenders to assess the risk of a loan by comparing the amount of the loan to the appraised value of the asset being financed. It helps determine the amount of equity in the asset and the level of risk involved in the loan. A higher LTV ratio indicates a higher risk for the lender, as the borrower has less equity in the asset. Therefore, Loan to Value ratio is the correct answer.

Sole proprietorship is generally the simplest form of business ownership for a small business. This is because it is owned and operated by a single individual, without the need for any formal legal entity or separate business structure. It offers simplicity in terms of decision-making, management, and taxation. Additionally, there are fewer legal requirements and regulations compared to other forms of business ownership such as corporations or partnerships.

The correct answer is PMT. PMT is an Excel formula that is used to calculate the EMI (Equated Monthly Installment) for a loan or mortgage. It takes into account the principal amount, interest rate, and the duration of the loan to calculate the fixed monthly payment that needs to be made. This formula is commonly used in financial analysis and planning to determine the affordability of loans and mortgages.

'Accounts payable' represents the amount of money owed by a company to its creditors for goods or services received but not yet paid for. Since it represents a current liability, it is expected to be paid within a year. Therefore, it would most likely appear in the balance sheet under 'current liabilities', which lists all the short-term obligations of the company. The balance sheet provides a snapshot of a company's financial position at a specific point in time, and it includes assets, liabilities, and equity.

MIG 1 category under PMAY (Pradhan Mantri Awas Yojana) is offered a 4% interest subsidy. This means that eligible individuals in the MIG 1 category can avail a subsidy of 4% on the interest rate charged on their home loan. This subsidy aims to make housing more affordable and accessible for middle-income groups.

A non-current asset is an asset that is intended for use on a continuing basis in the company's activities. This means that it is not expected to be sold or converted into cash within the next year. Non-current assets are typically long-term investments that provide future benefits to the company, such as property, plant, and equipment. They are recorded on the balance sheet and are essential for the company's operations and growth.

The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It includes information about the company's assets, liabilities, and shareholders' equity. By analyzing the balance sheet, investors and stakeholders can assess the financial strength of the business, including its liquidity, solvency, and overall financial health. Therefore, the balance sheet indicates the financial strength of the business.

The approximate sales (units) in the Indian Automotive industry in the year 2019 were 4.18 million.

A secured amortizing loan is most likely to have the lowest total interest cost because it is backed by collateral, such as property or assets, which reduces the risk for the lender. Additionally, an amortizing loan requires regular payments of both principal and interest over a set period of time, which helps to reduce the total interest cost compared to a non-amortizing loan where the interest is not paid off over the term of the loan.

A demand loan with monthly payments secured by assets is the loan contract with the lowest risk because it has both regular monthly payments and assets serving as collateral. This means that the borrower is required to make consistent payments, reducing the risk of default, and the lender has the security of assets that can be used to recover the loan amount in case of default. This combination of regular payments and collateral provides a higher level of security for the lender, making it the lowest risk option among the given choices.

The correct answer is 5% because it is the closest option to the approximate size of the Indian real estate industry as a percentage of GDP. This suggests that the real estate industry contributes around 5% to the overall GDP of India.

The recent industry trends in the Indian automotive industry include the promotion of low-cost electric vehicles, the implementation of the voluntary vehicle fleet modernization program, and the adoption of Bharat Stage VI norms. However, the focus on diesel-run vehicles is not a recent trend in the industry.

PEST analysis is a tool used to assess the general business environment. It stands for Political, Economic, Social, and Technological factors. It helps businesses understand the external factors that may impact their operations and make informed decisions. MAST framework is a strategic planning tool, Cash flow analysis is used to assess the financial health of a business, and SWOT analysis is used to evaluate the internal strengths and weaknesses of a business. Therefore, PEST analysis is the most appropriate tool for assessing the general business environment.

The correct answer is "Personal Asset Guarantee by promotors of the enterprise is must". This means that one of the features of the recently announced Auto Loans for MSME is not requiring personal asset guarantee by promoters of the enterprise.

The correct answer is "MSMEs will be able to attract global investments." This statement is not a feature of the Global tenders policy announced as part of the COVID-19 financial package. The policy focuses on disallowing global tenders in government procurement tenders up to Rs 200 crores, promoting self-reliance in India, supporting Make in India, and helping MSMEs increase their business. However, it does not specifically mention that MSMEs will be able to attract global investments.

The correct answer is 10%. This means that Bajaj Finance holds approximately 10% of the market share in the electronic goods financing market. This indicates that Bajaj Finance is a significant player in the market, but there are other competitors that have a larger market share.

A variable-interest loan allows the borrower to take advantage of a decrease in the reference rate. This means that if the reference rate decreases, the interest rate on the loan will also decrease, resulting in lower monthly payments for the borrower. This can be beneficial as it allows the borrower to save money and potentially pay off the loan faster.

To calculate the total interest, we use the formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years. In this case, the principal amount is Rs 5,000, the interest rate is 4%, the interest is compounded annually (n = 1), and the time period is 2 years. Plugging in these values, we get A = 5000(1 + 0.04/1)^(1*2) = 5000(1 + 0.04)^2 = 5000(1.04)^2 = 5000(1.0816) = 5408. The total interest paid is A - P = 5408 - 5000 = 408. Therefore, the correct answer is 408.

The principal purpose of charging depreciation on non-current assets is to spread the cost of the assets over their estimated useful lives. Depreciation is a systematic allocation of the cost of an asset over its useful life, reflecting the wear and tear, obsolescence, and loss of value over time. By spreading the cost, it ensures that the expense is recognized gradually and matches the revenue generated by the asset. This helps in accurately representing the financial position of the company and provides a more realistic view of the asset's value on the balance sheet.

Unutilized lines of credit or loans indicate strong "Capital" for a company because it means that the company has access to additional funds that can be used for various purposes such as expansion, investment, or managing cash flow. This shows that the company has financial flexibility and resources available to support its operations and growth.

Liquidity ratios provide information about a company's ability to meet its short-term debt obligations. These ratios measure the company's ability to convert its assets into cash quickly to pay off its debts. By analyzing liquidity ratios such as the current ratio and the quick ratio, investors and analysts can assess whether a company has enough liquid assets to cover its short-term liabilities. Therefore, the correct answer is "The company's ability to pay off debt obligations."

A high asset turnover ratio indicates that a company is effectively utilizing its assets to generate revenue. This suggests that the company has a strong capacity to generate sales and efficiently use its resources. Increasing accounts payables, high debt to equity ratio, and positive investing cash flows do not directly indicate strong capacity.

Equity as a source of funding does not have additional financial commitments because it does not require regular interest payments or fixed repayment schedules like debt financing does. Equity financing involves selling ownership shares in the company to investors in exchange for capital. This means that the company does not have the obligation to make regular payments to investors, which can help to reduce financial strain and provide more flexibility in managing cash flow.

In a general partnership, partners are not only liable for the portion of capital they invested in the business. They are also personally liable for the debts and obligations of the partnership, which means their personal assets can be used to satisfy the partnership's debts.

Wrongly punching the interest rate structure offered to a client in the system while underwriting a loan is an example of operational risk. Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. In this case, the error in inputting the interest rate structure is a failure in the internal process of the underwriting system, leading to potential financial losses or negative consequences for the organization.

EMI stands for Equated Monthly Instalment. It is a fixed amount of money that a borrower has to pay to a lender on a monthly basis, as part of a loan repayment. The EMI includes both the principal amount and the interest charged on the loan. This ensures that the borrower pays off the loan in regular installments over a specific period of time, making it easier to manage their finances.

No Cost EMI is a payment option where the interest cost is borne by the seller or manufacturer, and not by the customer. The correct answer states that lenders do not earn any interest in such transactions. This means that the lenders offering the No Cost EMI option do not charge any interest on the loan amount, making it a truly interest-free transaction for the customer.

Retail banking focuses on providing financial services to individual clients, such as personal loans, savings accounts, and mortgages. It aims to reach a larger customer base and diversify its risks by serving a wide range of individuals. However, business lending services are not typically associated with retail banking. Instead, business lending is a characteristic of commercial banking, which focuses on providing financial services to businesses and corporations.