INSTITUTE OF BANKING STUDIES (IBS)

INSTITUTE OF BANKING STUDIES (IBS) Q. What is credit? a) A process of giving loans and advances b) The loans are repayable over a period of time in fu...
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INSTITUTE OF BANKING STUDIES (IBS) Q. What is credit? a) A process of giving loans and advances b) The loans are repayable over a period of time in future c) The extent of credit, depends on credit worthiness of the Borrower d) All the above Q. Which of the following is relationship between a Banker and a Borrower? a) Principal and Agent b) Lender and Borrower c) Both (a) and (b) d) None of these Q. The purpose of credit could be; a) deployment of resources for productive purpose b) Industry and business development c) to meet personal lawful requirements d) All the above Q. Which of the following is principal objective of a availing credit? a) Investment in Assets for productive purposes b) Acquiring Assets for personal use c) To meet personal financial requirements d) All the above Q. The principle of a loan repayments is; a) To repay from the future earnings of the Assets created out of loan amount b) By selling the Asset c) From own sources d) Repayment can be make from any other income Q. Which of the following statement is not correct regarding importance of credit? a) Credit enables the consumers to spend more than what they would have spent otherwise b) Increased demand induces the producers to produce more and leads to increase in GDP c) Excessive availability of credit for unproductive purposes, does not affect the inflationary pressure in any manner d) RBI makes uses of monetary tools to regulate the credit Q. Traditionally, the –––––– plays an important role in meeting credit needs of individual in India, particularly in rural areas: a) Banks b) Financial Institutions c) Private money lenders d) All the above Q. After nationalization of banks RBI was able to exercise ––––––– control on banks in credit matters: a) Lesser b) More c) Same d) No Q. Which of the following is not an important principle of credit: a) Purpose of credit b) Risk spread c) Safety of funds d) None of the above Q. The different types of borrowers are regulated under different Law. Which of the following does not match in this context: a) Partnership firms – Indian Partnership b) Companies – Companies Act

c) Individuals – Limitation Act d) Cooperative Societies – Coop Societies Act or Societies Registration Act Q. The availability of credit helps in; a) creating additional demand for a service or product b) increased purchasing power c) in increased industrial production d) All the above Q. The excessive availability of credit may result in; a) gap in demand and supply b) increased inflation c) misuse of resources d) All these Q. Which of the following are the monetary tools used by the RBI to control the credit? a) Bank Rate b) Repo Rate c) CRR/ SLR d) All these Q. Which of the following policies are relevant to the credit policy formation? a) Monetary and Credit Policy b) Fiscal Policy c) EXIM Policy d) Trade Policy Q. The credit Policy is framed by; a) Finance Ministry Government of India b) Reserve Bank of India c) SEBI d) Financial Supervision Board Q. Which of the following statement is not correct: a) Credit can be fund based or non – fund based b) In case of fund based loans, there is actual transfer of funds never takes place c) In case of non-fund based loans, the transfer of funds never takes place d) A bank guarantee falls under the non- fund based category loans Q. Which of the following is not a form of non – fund based commitment on the part of a bank: a) Letter of credit and bank guarantees b) co-acceptances c) Forward contract and other derivatives d) None of the above Q. Banks have to report their business for public reporting purposes, based on the geographical segments are: a) Domestic transactions and international transactions b) Rupee transactions and foreign currency transactions c) Banking business transactions and non-banking business transactions d) All the above Q. Which of the following is correct with regard to restructuring of loans accounts: a) Restricting can be taken up for standard, sub standard and doubtful accounts b) Restricting can be done with retrospective or prospective effect c) restructuring of only viable accounts is allowed d) During the period of consideration of restructuring proposal, usual classification norms will continue. 1

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INSTITUTE OF BANKING STUDIES (IBS) Q. As per orientation criterion for retail banking segment, the exposure should be to individuals or small business. The small business for this purpose is one, where the annual turnover is less than: a) Rs.1cr b) Rs. 10cr c) Rs. 50 cr d) Rs. 100 cr Q. Which of the following is CORRECT regarding credit policy? a) It is announced every half year by RBI b) It is reviewed quarterly c) RBI can bring changes in any of the credit policy instruments any time d) All the above Q. Credit can be; a) Institutional and non-institutional b) productive and unproductive c) regulated and unregulated d) All the above Q. What could be the purpose of credit? a) Productive use b) To meet personal requirements c) To conduct any lawful activity d) All the above Q. Which of the following are basic principles of credit? a) Safety of funds b) Lawful activity c) Profitability d) All these Q. Which of the following is not the principle of credit? a) To increase profitability by investing in any activity b) Liquidity c) Security d) Risk spread Q. As per granularity criterion for retail banking segment, the aggregate exposure to one counterparty should not exceed: a) 0.1% of overall retail portfolio b) 0.2% of overall retail portfolio c) 0.3% of overall retail portfolio d) 0.5% of overall retail portfolio Q. The loan policy of banks in farmed by: a) Individual banks for themselves b) Indian Banks’ Association for all c) Reserve bank of India for all d) Ministry of Finance, Govt. Of India for all Q. As per RBI guidelines, an MSEs will be treated a sick MSE, if the following conditions are satisfied: a) The loan account is irregular for 6 months b) The net worth (during the previous financial year) erosion is 50% or more c) The unit is in commercial production for at least 2 years. d) a or b and c Q. Which of the following is part of loan delivery process in a bank? a) Documentation only b) Documentation and creation of charge over securities only

c) Documentation , creation of charge over securities and method of delivery only d) Documentation , creation of charge over securities and method of delivery and procedure for disbursement Q. Which of the following activity is not a category of priority sector lending: a) Agriculture b) SME c) Retail trade & education loan d) Micro credit and house loans Q. Risk spread means; a) Not to concentrate the credit on a specific segment b) Distribution of credit portfolio among different sectors c) To minimize the risk by way of diversification d) All the above Q. The purpose of security of a loans is; a) To recover the loan amount along with interest b) Preserving a Right over the Asset in case of default c) To meet the obligations of a Bank in time d) All of above Q. The purpose of liquidity of a Bank loan could be; a) To ensure proper Asset liability management b) To meet obligations of a Bank in time c) To recover the amount as and when required by the Bank d) All the above Q. What is profitability? a) To increase the Revenue and Income b) To improve the efficiency of certain financial ratios c) To increase of the profits every year d) All the above Q. What is priority credit? a) The loans given to neglected sectors b) Providing loan to the identified group of people as per RBI norms c) The sectors which were given preference in credit allocation by the RBI d) All the above Q. Which among the following is correct for overall priority sector lending target for banks: a) For domestic banks it is 40% of ANBC and for foreign banks it is 32% of credit equivalent of offbalance sheet exposure. b) For domestic banks it is 40% and for foreign banks it is 32% of ANBC or credit equivalent of off-balance sheet exposure, whichever is higher c) For domestic banks it is 40% of ANBC and for foreign banks it is 40% of credit equivalent of offbalance sheet exposure. d) For domestic banks it is 40% and for foreign banks it is 32%, of ANBC or credit equivalent of Offbalance sheet exposure, whichever is lower. 2

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INSTITUTE OF BANKING STUDIES (IBS) Q. Within the priority sector lending targets for indirect agriculture, which of the following is not correct: a) It is maximum 4.5% ANMC or credit equivalent of off-balance sheet exposure whichever is higher b) It is restricted to 45% of total agriculture advances c) Lending beyond 4.5% of ANBC will not be taken into account for computing 18% lending to agriculture d) All indirect agriculture advances will be taken as part of priority sector lending Q. Lending target for weaker section within the priority sector are ––––––– of ANBC or credit equivalent of off-balance sheet exposure whichever is higher OR ––––– % priority sector: a) 10%,25% b) 15%,25% c) 15%,40% d) 15%, 40% Q. Lending to which of the following group is not part of weaker section, within priority sector: a) Small and marginal farmers with land holding up to 5 acre b) Artisan and village & cottage industries up to Rs.50000 c) Micro credit up to Rs. 50000 d) DRI, PMEGP, SGSY Q. Which of the following is not correct in connection with priority sector lending target for micro and small enterprises : a) For domestic banks, the overall target is 10% of ANBC or credit equivalent of off-balance sheet exposure whichever is higher b) For foreign banks, the overall target is 10% ANBC or credit equivalent of off-balance sheet exposure whichever is higher c) Within MSE lending ,minimum 60% should be given to micro enterprises d) Within MSE lending 40% can be given to small enterprises Q. Which of the following is priority credit? a) Loans to Agriculture Activities b) Loans to Small and Medium Enterprises c) Loans to Small Transport Operators d) All the above Q. Which of the following is not priority credit? a) Loans to Retail Trade and Small Business b) Loans for construction of residential houses c) Loans for weaker sections d) Loans for professional and self employment activities Q. Which of the following can be a Borrower? a) An individual b) A proprietorship c) Partnership firm d) All these Q. Which of the following cannot be a Borrower? a) A company b) A minor c) Statutory Corporations d) Trust and Co-operative Societies

Q. Which of the following is CORRECT regarding types of Borrower; a) Different kinds of laws are applicable to different Borrowers b) Hindu undivided family can be a Borrower c)The individual Borrowers are governed by the Indian Contract Act d) All the above Q. Which of the following is CORRECT regarding classification of credit? a) It can be fund based or non-fund based b) It can be short term or long-term credit c) Credit can be classified based on the purpose d) All the above Q. The fund based credit signifies that; a) It involves actual transfer of money from Bank to the Borrower b) The Bank’s fund are involved in this c) Both a) and b) d) None of the above Q. Which is non-fund based credit? a) It does not involves money transfer from Bank to Borrower b) There may be a future commitment c) Bank’s money may be or may not be involved d) All the above Q. Which of the following is non-fund based activity for a Bank? a) Issue of Letter of Credit b) Issue of Bank Guarantee c) Forward Contracts d) All these Q. Which of the following is CORRECT regarding non-fund based activity? a) Non-fund based credit can be converted into fund based activity at a future date b) Co-acceptance of Bill is non-fund based credit c) Issuing a letter of solvency is a non-fund based activity for a Bank d) All the above Q. Which of the following is correct with regard to lending targets of export credit: a) For Indian banks there is no target and foreign banks it is 12% of ANBC b) For Indian banks it is 10% of ANBC and foreign banks it is 12% of ANBC c) For Indian banks there is no target within priority sector although it is 12% of ANBC and foreign banks it is 12% of ANBC within priority sector d) for Indian banks there is no target within priority sector although it is 10% of ANBC and foreign banks it is 10% of ANBC within priority sector Q. Which of the following target is not mandatory for foreign banks: a) Priority Sector-32% of ANBC or credit equivalent of off-balance sheet exposure b) MSE – 10% of ANBC or credit equivalent of off-balance sheet exposure 3

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INSTITUTE OF BANKING STUDIES (IBS) c) Export – 12% of ANBC or credit equivalent of offbalance sheet exposure d) Housing – 3% of incremental deposit as on last reporting Friday of previous year Q. Which of the following target is not mandatory for domestic banks: a) Priority Sector – 40% of ANBC or credit equivalent of off-balance sheet exposure b) Weaker Section – 10% of ANBC or credit equivalent of off-balance sheet exposure c) Agriculture – 18% of ANBC or credit equivalent of off-balance sheet exposure d) MSE – 10% of ANBC or credit equivalent of off-balance sheet exposure Q. For banks, which of the DRI target is not correct: a) The target is applicable both for domestic banks and foreign banks b) 40% of DRI loans should be to SC or ST c) Two third of DRI loans should be disbursed through rural and semi urban branches of banks d) Overall targets is 1% of total credit of previous year Q. For a small enterprise in servicing, which of the following investment criteria is correct: a) Investment in equipment above Rs. 25lac but up to Rs. 5 cr b) Investment in plant & machinery Rs. 25lac but up to Rs.5 cr c) Investment in equipment above Rs. 10 lac but up to Rs. 2 cr d) Investment in equipment Rs.10 lac but up to Rs.2cr Q. For a micro enterprise which of the following investment criteria is correct: a) Investment in equipment up to Rs. 25 lac and in plant & machinery up to Rs. 10 lac b) Investment in equipment up to Rs. 10 lac and in plant & machinery up to Rs. 25 lac c) Investment in equipment up to Rs. 25 lac and in plant & machinery up to Rs. 25 lac d) Investment in equipment up to Rs. 10lac and in plant & machinery up to Rs. 10 lac Q. All advances granted to units in KVI sector irrespective of size of operations, location and amount of original investment in plant and machinery are considered as: a) Advances to small enterprises b) Advances to micro enterpriser for 40% target achievement c) Advances to micro enterpriser for 60% target within MSE d) Such advances are not part of SME neither any concession is available Q. Advances allowed to retail traders are part of MSE advances in priority sector where: a) Limit is restricted to Rs. 20 lac in case of essential goods

b) Limit is above Rs. 20 lac in case of other goods c) Limit is without any ceiling in case of other goods and Rs. 20 lac in case of essential goods d) Limit is without any ceiling in case of essential goods and Rs. 20 lac in case of other goods Q. Education loan can be allowed by a bank to the following extent (which one is correct): a) Education in India Rs. 10 and education abroad Rs. 20 lac b) Education in India Rs. 20 and education abroad Rs. 10 lac c) Education in India Rs. 10 and education abroad Rs. 10 lac d) Education in India Rs.20 and education abroad Rs. 20 lac Q. In priority sector the amount of house loan, per family can be : a) Rs. 20 lac if constructed in urban and metro centers only b) Rs. 20 lac if constructed in rural only c) Rs. 20 lac if constructed in semi – urban centres only d) Rs. 20 lac irrespective of the place Q. For repair of a house, the amount of loan is restricted as under(which is correct): a)Repair in urban and metro areas Rs. 1 lac b) Repair in rural and semi urban areas Rs. 2 lac c) Repair in rural and semi urban areas Rs. 1 lac and Rs. 2 lac in urban and metro areas d) Maximum Rs. 2 lac in all cases Q. Which types of business have to be reported for Public Reporting purpose? a) Treasury b) Retail Banking c) Corporate Banking d) All these Q. How does Retail Banking is defined by Basel Committee on Banking Supervision? a) An individual person or persons b) Small business c) Any legal person capable to contract d) All the above Q. What is the turnover criteria under Retail Banking? a) Small Business with turnover of less than 50 crore per annum b) It should be an average of 3 years c) It can also be a projected turnover for the new units d) All the above Q. Which of the following can be categorized under Retail Banking? a) Revolving Credit including overdrafts b) Term loans c) Lease d) All the above Q. Which of the following is not Retail Banking? 4

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INSTITUTE OF BANKING STUDIES (IBS) a) Overdraft limit of Rs.100 crore b) Instalment loans c) Educational loan d) Small Business Facilities Q. What is “aggregate exposure” under Retail Banking? a) Gross amount of all forms of debt exposure b) The term counterpart means one or several entities be considered as a single beneficiary c) If one small business is affiliated to another small business, the aggregate exposure for the Bank would be for both the business d) All the above Q. Which of the following is aggregate exposure limit to one counterpart? a) 0.2% of overall retail portfolio b) 0.5% of overall retail portfolio c) 1% of overall retail portfolio d) 2% of overall retail portfolio Q. Is there any maximum limit for exposure to an individual under Retail Banking? a) Rs.10 crore b) Rs.5 crore c) Rs.100 crore d) Rs.20 crore Q. What are the factors which influence loan policy formulation of a Bank? a) Overall guidelines of RBI b) Bank’s own financial strength c) Commitment for mandatory regulations d) All the above Q. What are the factors does not influence loan policy of a Bank? a) Market practice b) Status and Strategies of other competitors c) Political influence d) Demand from the market Q. Banks cannot grant loans and advances on the security of their own shares. This is requirement of: a) Selective Credit Control of RBI b) Directives of RBI u/s 35-A of banking Regulation Act c) Section 20(1) of Banking Regulation Act d) Section 24(1) of RBI Act Q. Under provisions of Section 19(2) of Banking Regulation Act, the banks can hold shares of a company as pledge, mortgagee or absolute owners, maximum to the extent of : a) 30% of their own paid up capital b) 30% of their capital of the company c) 30% of their own paid up capital and reserves or 30% of paid-up capital and reserves of the company whichever is lower d) 30% of their own paid up capital and reserves or 30% of paid-up capital of the company whichever is lower Q. A company wants to go for buy back of its shares. Which of the following sources cannot be used by the company for this purpose:

a) Bank loan b) Securities premium account c) Proceeds of any shares or specific securities d) Free reserves Q. Loans to directors of other bank or the firms in which they are interested can be sanctioned by banks. Which of the following is not correct in this context? a) Loan of Rs. 25 lac and above can be sanctioned by Board of the bank b) Loan below Rs. 25 lac can be sanctioned by authority in whose favor such powers are vested c) Where loans are sanctioned by and authority below board, it requires reporting to the Board d) None of the above Q. Which of the following statements based on RBI regulation regarding loans and advances against security of shares, debentures is not correct: a) Loans against partly paid shares cannot be given banks b) Loans against primary security of shares cannot be given to partnership firms c) Loans against primary security of shares cannot be given to proprietorship firms d) None of the above Q. Loans against the security of fixed deposits of other banks cannot be allowed by banks are per RBI directives because: a) The deposit holding bank ahs the paramount lien on such deposits b) The depositing holding bank can exercise the right of set off and in that event the loan of the bank becomes unsecured c) There could be instances of fake term deposit receipts purported to be issued by other banks. d) All the above Q. Under group exposure norms of RBI, the ceiling on such credit exposure in respect of borrowers belonging to a group is : a) 40% of the capital fund of the bank which can be relaxed by 10% for infrastructure projects. b) 40% of the paid up capital of the bank which can be relaxed to additional 10% for infrastructure projects. c) 40% of the net worth of the bank which can be relaxed to additional 10% for infrastructure projects d) 40% of the capital up capital + reserves of the bank which can be relaxed to additional 10% for infrastructure projects Q. Who formulates the loan policy of a Bank? a) RBI b) Finance Ministry c) Individuals Banks d) Indian Banks Association Q. Which of the following receive coverage in the loan policy document of a Bank? a) Maximum exposure for a single as well group borrowers 5

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INSTITUTE OF BANKING STUDIES (IBS) b) Priority given while credit allocation c) thrust areas for loan priority d) All the above Q. Which of the following is NOT covered under loan policy document of a Bank? a) Delegation of sanction powers b) Authority for over drawings and adhoc limits c) Interest rate from time to time d) Individual borrowers details Q. Which of the following authorities decides interest rates on loans? a) RBI b) Individual Banks c) Borrowers d) Based on Repo Rates Q. Which of the following are important considerations for considering a loan to Borrower? a) Purpose of availing loan b) Viability of a project c) Lands of risks involved in the project d) All the above Q. Which of the following is under the discretion of a Bank while considering a loan? a) The extent of loan b) Terms and conditions c) Repayment of loan d) All these Q. Which of the following is NOT under the discretion of a Bank for considering a loan? a) Interest rate b) Creditor’s Policy of a supplier c) Covenants for a loan d) Ensuring and use of a loan Q. Which of the following terms are considered by a Bank in the matter of loan? a) Collateral security b) Personal guarantee c) Mode of creating a charge over the Asset d) All the above Q. What does a credit appraisal involve? a) Viability of a project b) Terms and conditions c) Types of securities d) All the above Q. Which of the following factors help in credit appraisal? a) The back ground of a Borrower b) Financial position/ status of a Borrower c) Net worth and repayment capacity of a borrower d) All the above Q. What does a Techno-economic feasibility report comprise of? a) Technical viability of the project b) Availability of technology c) Availability to technical know how and its maintenance etc. d) All the above Q. In exceptional cases, the exposure ceiling can be relaxed with the approval of Board, the exposure ceiling can be relaxed with not required to be satisfied in that case:

a) It can be up to 5% b) It is subject of disclosure in the bank balance sheet as part of notes on accounts. c) It is subject to disclosure in public domain i.e. website of the bank. d) None of the above Q. Which of the following type of exposure is not exempted from the group exposure ceiling prescribed by RBI: a) Rehabilitation of sick and weak industrial units b) food credit c) Guarantee given by State Govt. d) Loans against bank deposit Q. Which of the following statement is not correct regarding exposure guidelines of RBI: a) Exposure include all credit exposure b) Exposure include all investment exposure c) Sanctioned limits or outstanding balance, whichever is higher in loan account shall be taken in total amount of exposure. d) If term loans are fully disbursed, the amount outstanding shall be taken Q. For the purpose of group exposure ceiling , the group will be determined on the basis of : a) Similar name of other companies b) same premises form where the borrowers are functioning c) Common management and effective control d) All the above Q. If a documents under an LC are negotiated by a bank under reserve, for capital adequacy purposes, the risk weight will be with reference to : a) Borrower, as if no LC was available b) Bank issuing the LC c) Between borrower and the bank d) None of the above Q. Loan system of credit delivery is required to be used by banks where: a) Fund and non-fund based working capital limits are Rs.10 cr and above b) Fund based working capital limits and term loans are Rs.10 cr and above c) Fund working capital limits (MPBF) are Rs.10 cr and above from the banking system d) Non- fund based working capital limits are Rs. 10 cr and above Q. Under Loan system of Credit delivery, the permanent portion called working capital demand loan (WCDL)should normally be: a) 80% of the MPBF b) 75% of the MPBF c) 50% of the MPBF d) 20% of the MPBF Q. How does a Bank control the loan? a) Ensuring and use of loan b) Regular check up and physical visits of the unit c) Extend facilities in case of difficulties d) All the above 6

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INSTITUTE OF BANKING STUDIES (IBS) Q. The delivery if loans means; a) Obtaining documents and creating charge on the security b) Method of delivery of credit c) a) and b) both d) None of the above Q. If the activity for which loan was obtained is not carried out as projected. It may result in; a) under/non-performance of the unit b) non-repayment of loans as desired c) changes of turning the loan as Bad debt d) All the above Q. Which of the following are scheme for revival of a unit? a) Rehabilitation of Sick units b) Corporate Debt Restructuring c) a) and b) both d) None of the above Q. Which of the following may be the reasons for non-performance and default of a loan repayment? a) Adverse marketing conditions b) Managerial problems of the unit c) Willful default d) All the above Q. What is Credit Risk? a) Risk of non-payment in time b) Recession in demand c) Willful default d) Intention of the Borrower Q. What is refinance? a)Claiming finance from an Agency on the basis of financial assistance made to various Borrowers under specified scheme b) Over finance c) Providing finance to a Borrower for the second time d) All the above Q. Which of the following agencies are involved in extending refinance to the Banks? a) NABARD b) SIDBI c) RBI d) All these Q. How does a Bank ensure and use of loan amount? a) By ensuring non-diversion of loan funds b) Loan amount is used in full for purpose for which it was availed c) Withdrawal from cash credit account are regulated d) All the above Q. Which of the following is NOT a credit for priority sector? a) Loan to medium enterprises b) Education loans up to Rs.10 lac in India c) Housing loan for dwelling units up to Rs.20 lac d) Micro Credit

Q. Which of the following is CORRECT regarding priority credit? a) Export credit given by a Domestic Bank is not a priority credit b) Banks in India need to achieve 10% of their total credit to weaker sections c) There is no target for loans to small enterprises d) All the above Q. Under Loan system of Credit delivery, the fluctuating portion called cash credit component should normally be: a) 80% of the MPBF b) 75% of the MPBF c) 50% of the MPBF d) 20% of the MPBF Q. Banks as part of fair Practice Code for Lenders, should indicate, in the acknowledgement for loan application the time frame for disposal, in case of amount up to: a) Rs.25000 b) Rs. 50000 c) Rs. 2 lac d) Rs. 5 lac Q. As per Fair Practice Code for lenders liability, if a borrower if facing some lender related genuine difficulty, the banks should be constructive in handling them, where the loan amount is: a) Rs.25000 b) Up to Rs. 2 lac c) Rs. 5 lac d) Rs. 25 lac Q. Where a borrower wants transfer his loan account from one bank to another bank, the exiting bank should give consent or otherwise, within a period of: a) One month b) 21 days c) 15 days d) 10 days Q. Loans to individuals against the security of shares, convertible debentures, convertible bonds and units of equity oriented mutual funds can be maximum to extent of: a) Rs. 10 lac if these are in physical form and Rs.20 lac if in demat form b) Rs. 20 lac if these are in physical form and Rs.10 lac if in demat form c) Rs. 20 lac if these are in physical form and Rs.20 lac if in demat form d) Rs. 10 lac if these are in physical form and Rs.10 lac if in demat form Q. If a bank guarantee is issued on behalf of commodity exchange broker in favor of a commodity exchange, what is the margin % age to be retained on such guarantee: a) 25% which should be cash margin b) 50% out 25% should be cash margin c) 50% which should be cash margin d) Discretion of a bank Q. The base rate system has replaced which of the following? a) Deposit interest rates b) Bench mark prime lending rate c) Ceiling rate of interest on foreign currency deposits d) Bank rate 7

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INSTITUTE OF BANKING STUDIES (IBS) Q. The base rate system has become applicable with effect from: a) March 31, 2010 b) April 01,2010 c) July 01, 2010 d) Dec 31, 2010 Q. base rate calculation can be made by banks (which statement is correct) : a) Ad per method suggested by RBI b) As per their own method c) If banks adopt their own method it should be consistent d) All the statements are correct Q. Which of the following s NOT CORRECT regarding priority credit in respect of Foreign Bank? a) They have certain target to achieve for weaker sections b) Export credit forms part of priority credit c) There are no target for Agriculture advances d) They need to extend 32 percent of their loans to priority sectors Q. Which of the following falls under weaker section category? a) Village and Cottage Industries up to credit limit of Rs.50000 b) Scheduled Castes/ Scheduled Tribes c) Beneficiaries under DRI Scheme d) All the above Q. Which of the following does not fall under weaker section category for the purpose of loan from the Bank? a) Education loan b) Small and Marginal farmers up to land holdings of 5 acres c) Self Help Groups d) None of the above Q. The essential features of MSMED Act 2006 are; a) It contains modified definitions of micro, small and medium enterprises b) Such enterprises are engaged in manufacturing or production or rendering services c) This Act was passed in 2006 d) All the above

Q. Which of the following is CORRECT regarding investment in Plant and Machinery if MSM enterprises are engaged in providing services? a) Investment up to Rs.10 lac for Micro enterprises b) More than Rs.10 lac and up to Rs.2 crore for small enterprises c) More than Rs.2 crore and up to Rs.5 crore in case of Medium Enterprises d) All the above Q. Which of the following are the services included in MSM enterprises? a) Small Road and Water transport operators b) Small Business c) Professional and Self Employed persons d) All the above Q. Which of the following is CORRECT regarding exposure norms for a Bank to finance an individual and group of Borrowers? a) A ceiling of 15 percent of capital funds for a single Borrower and 40 percent of capital funds of group of Borrowers b) It can further exceed another 5 percent for dingle Borrower and 10 percent of group of Borrowers for additional credit exposure to additional credit to infrastructure projects c) Exposure limit for a single Borrower in respect of oil companies is 25% of capital fund with an additional provision of 5% d) All the above Q. The system of charging interest on the basis of Base Rate was introduced on; b) 1st July 2010 a) 1st January 2010 th d) 30th Sep.2010 c) 30 April 2010 Q. The essential features of Base Rate are; a) It replaces the BPLR system b) Banks may fix actual lending rates on loans and advances based on the Base Rate c) There should be transparency in charging actual lending rates d) All the above Q. Which of the following categories of loans can be priced by banks without reference to the Base Q. Which of the following is CORRECT regarding Rate: investment limit for MSM Enterprises. The a) DRI loans Investment in plan and machinery should be ; b) Loans to members of staff a) It does not exceed Rs.25 lac, in case of Micro c) Loans to bank’s deposits against their own Enterprises deposit b) It should be more than Rs.25 lac and up to d) All the above Rs.500 lac in case of medium enterprises Q. The base rate is required to be reviewed by c) It is more than Rs.5 crore and up to Rs.10 crore in banks at least ––––––: case of medium enterprises a) Once in a month d) All the above b) Once in a Quarter Q. What does an investment include? c) Once in a half year d) Once in a year Q. Within a bank, the base rate can be fixed a) It is the original cost of Plant and Machinery /reviewed by (a) Board of directors (b) Asset Liability b) It excludes the cost of land building Committee (c) Risk Evaluation Committee c) It also excludes certain items specified by ministry (d) Customer Service Committee of Board of of small scale industries Directors; d) All the above 8

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INSTITUTE OF BANKING STUDIES (IBS) a) Only a b) a or b as per practice in the bank c) a or d, as per practice in the bank d) a to d any Q. Which of the following statement is not correct regarding penal interest? a) Policy for penal interest should be transparent b) Penal interest for all loans is at discretion of banks c) For loans up to Rs. 25000, no penal interest to be charged d) For loans above Rs. 25000, no penal interest is at discretion of the bank. Q. In case of MSEs loans, the collateral security for a loan up to Rs.––––– not to be taken mandatorily. a) Rs.2 lac b) Rs. 5 lac c) Rs. 10 lac d) Rs. 25 lac Q. MSEs availing credit limits up to Rs. ––––––– are required to calculate the working capital as per Turnover method suggested by Nayak Committee: a) Rs.1 cr b) Rs. 2 cr c) Rs. 5 cr d) Rs. 10 cr Q. As per turnover method of Nayak Committee, working capital limit is to be computed as ––––––– of the projected annual turnover: a) 5% b) 20% c) Min 25% d) Max 25% Q. Which of the following purpose is not served by the financial statements obtained from borrowers: a) To know the net worth of the borrower b) To estimate the repayment capacity of the borrower c) To understand the viability of the activity d) To make assessment about collateral security, that would secure the loan Q. Which according standard makes its mandatory for certain firms to prepare cash flow statements: a) AS 3 b) AS 6 c) AS 9 d) There is no such requirement Q. Which of the following is not user of financial statements of a particular firm/company: a) Investors b) Bankers c) Employees d) None of the above Q. Which of the following is CORRECT regarding Base Rate? a) Base Rate is the minimum rate for all loans b) RBI will announce separately the stipulation for export credit c) Banks to review the Base Rate at least once in quarter d) All the above Q. Which of the following loans are not covered under the Base Rate? a) DRI loans b) Loans to Banks own employees c) Loans against fixed deposits d) All the above

Q. Which of the following is TRUE regarding Base Rate? a) It can be a reference benchmark rate for floating rate loans in additional external market benchmark rates b) The interest on floating rate should be equal or above the base rate if interest at the time of sanction of loan is based on external benchmark rates c) Both a) and b) above d) None of the above Q. Which of the following is NOT CORRECT regarding Base Rate? a) Existing customer can shift to the Base Rate system subject to payment of certain fee b) Base Rate needs to be charged for new loans c) Existing customers have option to continue their loans based on BPLR till the maturity of loan d) An option for switch over to existing customers may be given Q. Which of the following is CORRECT regarding interest rate on advances? a) Interest should be charged at monthly rests b) It should be rounded off to the nearest rupee c) Term loans and working capital should be dubbed for the purpose of charging interest d) All the above Q. Which of the following is true, regarding charging of interest on agricultural loans? a) For long duration crop loans interest should be at annual rests b) The total interest charged to small and marginal farmes should not exceed the principal amount c) Both a) and b) above d) None of the above Q. Which of the following is CORRECT regarding interest rates loan and advances? a) Banks are free to offer fixed a floating rate of interest on all loans b) No penal rate of interest can be charged to priority sector loans up to Rs.25000 c) The provisions of penal interest should be transparent d) All the above Q. The provisions for obtaining collateral security are; a) Banks have liberty obtain collateral security b) RBI has exempted certain categories of loans where collateral security need not be obtained by the Bank c) The exempted limit for not obtaining collateral security for MSME loans is Rs.5 lac d) All the above Q. Who formulates monetary and credit policy? a) Reserve Bank of India b) Ministry of Finance c) Planning Commission d) SEBI Q. Which of the following is relevant regarding credit policy? 9

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INSTITUTE OF BANKING STUDIES (IBS) a) It is announced by the RBI twice in a year b) It is renewed quarterly c) It contains measures to ensure proper money supply in the economy d) All the above Q. Which of the following are restrictions imposed by the RBI for credit restriction? a) Loans against sensitive commodities under selective credit control b) Loans against fixed deposits issued by another Bank c) Loans against certificate of deposit d) All the above Q. The machinery is recorded in the books of a firm at the price paid to the supplier + the expenses of bringing and installing the machinery. This is due to application of: a) Money measurement concept b) Cost concept c) Business entity concept d) realization concept Q. The profit made by a firm is a liability for the business and loss made by a firm is an asset. This is due to application of: a) Going concern b) Cost concept c) Business entity concept d) realization concept Q. The accounting concepts used in preparation of accounts are: a) Methods for presentation of financial statements b) Board assumption for preparation of accounts c) Basic rules for preparation the accounts d) All the above Q. A business firm has to make all adjustments for prepaid expenses and outstanding expenses due to application of: a) Going concern concept b) Accounting period concept c) Matching concept d) Dual aspect concept Q. In the balance sheet of a firm, the notes relating to those facts are included, that do not find a place in the accounting statements. This is due to : a) Convention of materiality b) Convention of conservatism c) Convention of account of full disclosure d) Convention of consistency Q In a firm has been following the straight lien method of depreciation, it should continue to follow the same rather than changing to the written down value method. This is due to : a) Convention of materiality b) Convention of conservatism c) Convention of account of full disclosure d) Convention of consistency Q. Which of the following concept forbids the inclusion of unrealized gains but advocates the provision for possible losses:

a) Consistency concept b) Conservatism concept c) Business entity concept d) Historic record concept Q. The ––––––– concept refers to the expectation that the organization will have indefinite life due to which it has bearing on the valuation of assets: a) Consistency concept b) Business entity concept c) Going concern concept d) Historic record concept Q. For the purpose of analysis of financial position: a) The amount of intangible assets is added to assets b) The amount of intangible assets is deducted from liabilities c) The amount of intangible assets is deduced from net worth d) The amount of intangible assets is treated as a normal asset Q. Which of the following loans have no restrictions from RBI? a) Loans to companies to buy back their shares b) Loans to consumers c) Loans to relatives of directions d) Loans against Bank’s own shares Q. In case of SSI units, the working capital limit, should be assessed based on projected turnover if working capital limit is up to rupees; a) 5 crore b) 10 crore c) 2 crore d) 1 crore Q. The foreign banks are required to lend --------percent their credit to Priority Sectors. a) 20% b) 25% c) 32% d) 40% Q. What is fair practice code? a) These are RBI guidelines on fair practices code of lending b) They need to be followed by banks c) They basically focus on transparency to avoid exploitation and discrimination among borrowers d) All the above Q. To which of the following categories the fair practice guidelines pertain to; a) Processing of loan application b) Disbursement of loans c) Terms and Conditions to loan d) All the above Q. Which of the following is NOT CORRECT under Fair Practice Code? a) Non-rejection of loan proposal b) Monitoring and follow up of loan to ensure utilization c) Harassment in recovery d) Transfer of loan accounts Q. Which of the following statements is FALSE? a) RBI classifies Bank Assets into 3 categories 10

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INSTITUTE OF BANKING STUDIES (IBS) b) No provision is to be made by Banks in respect of Standard Assets c) The fair practice code are the guidelines issued by RBI. Each Bank has liberty to follow them d) All the above Q. In a Garnishee order, the Banker on whom garnishee order served is; a) Judgement Debtor’s Creditor b) Judgement Creditor’s Creditor c) Judgement Creditor’s Debtor d) Judgement Debtor’s Debtor Q. Hypothecation is applicable in case of; a) Movable goods b) Immovable property c) Book debts d) Corporate guarantee Q. A charge created in LIC policy is; a) Hypothecation b) Pledge c) Assignment d) Mortgage Q. Which of the following is not barred by law of limitation? a) Pledge b) Hypothecation c) Banker’s lien d) Guarantee Q. In the balance sheet of a firm, the amount of stocks has been taken as Rs. 50000 which is not the cost price but the expected price at which it may be sold. It is violation of: a) Consistency concept b) Conservatism concept c) Going concern concept d) Historic record concept Q. In case of banking companies, the format of balance sheet and profit and loss account is prescribed by: a) RBI Act b) Banking regulation Act c) Companies Act d) Reserve Bank of India Q. In case of a company other than a banking company, the format of balance sheet is prescribed by: a) SEBI b) Banking regulation Act c) Companies Act d) Not prescribed Q. In case of a company other than a banking company, the format of profit and loss account is prescribed by: a) SEBI b) Banking regulation Act c) Companies Act d) Not prescribed Q. The liabilities are placed just above the assets in case of: a) Common-size statement system b) Horizontal form of balance sheet c) Vertical form of balance sheet d) a and c both

Q. April-March is considered to be the financial year for: a) Obtaining credit facilities from banks b) Income tax purpose as per Income Tax rules c) The purpose of Companies Act d) The purpose of Indian Partnership act Q. As per Companies act, the maximum duration of financial year can be––––––: a) 12 months b) 15 months c) 18 months d) Any period with permission of Registrar of Companies Q. If an MSE sick unit is potentially viable, as per RBI guidelines, the rehabilitation is to implemented within: a) 2 months b) 3 months c) 6 months d) At discretion of the bank Q. Which of the following statement on equity and preference capital is not correct? a) On preference capital, the dividend rate may be fixed b) On preference capital, the dividend may be fixed cumulative c) On equity capital, there is fixed dividend rate d) None of the above Q. a company has gained on revaluation of its fixed assets. This gain falls in which of the following, on the liability side: a) Revenue reserve b) General reserve c) Capital reserve d) None of the above Q. The term credit management covers; a) Capital adequacy norms b) Risk management including Asset-liability management c) Credit Appraisal decision and review of loans d) All the above Q. Bank’s Assets are classified into standard Asset; Sub-standard Asset; Doubtful Assets and Loss Assets based on recommendations of ------a) Rangarajan b) Narasimham c) Ghosh d) Tandon Q. Cash Budget is a statement of; a) Cash non-cash funds b) Cash receipts and cash payments c) Another name for cash flow d) None Q. In Bank’s parlance, credit –risk in lending is; a) default of the Banker to maintain CRR b) Default of Banker to maintain SLR c) default of Banker to release credit to customer d) default of customer to repay the loan Q. The apex institution which handles refinance for agriculture and rural development is called; a) RBI b) SIDBI c) NABARD d) SEBI Q. Long Form Audit Report LFAR) s prepared and submitted by; 11

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INSTITUTE OF BANKING STUDIES (IBS) a) RBI Inspectors b) Internal Inspectors c) Statutory Auditors d) Concurrent Auditors Q. Interest is calculated on actual/ 365 days basis in respect of the following products except one; a) Call Money b) Notice Money c) Term Money d) GOI dated securities Q. Which of the following forms of business are permissible under BR Act? a) Borrowing b) Issuance of Letters of Credit c) Buying and Selling of Bullion d) all the above Q. Law of limitation is not applicable in respect of; a) Advance against pledge of share b) Against credit limit c) Term loan secured by mortgage d) Bank term deposits Q. Except the following , others are known as nonfund based facilities; a) Letter of Credit b) Bank Guarantee c) Co-acceptance of Bill d) Trust Receipts Q. FIMMDA’s guidelines cover the following products except one; a) Call Money b) Cross Currency Interest Rate Swaps c) Commercial Paper d) Certificate of Deposits Q. FIMMDA stands for; a) Foreign Exchange Markets and Derivative Markets b) Fixed Income Market, Money Markets and Derivative Markets c) Fixed Income Markets and Derivative Markets d) None of the above Q. What is Credit Risk? a) Counter party’s failure to perform an obligation b) Risk of customer’s worth c) Loss of money in transit d) All the above Q. The Market Risk is; a) Loss due to market adverse situations b) Change in price of assets/ commodities c) It may also include change in demand d) All the above Q. Who decides the interest rates on loans and advances? a) RBI b) Finance Ministry c) Individuals Banks d) SEBI Q. Which of the following does not fall in revenue reserves of a company: a) Dividend equalization reserve b) Investment allowance reserve c) Share premium reserve d) Capital redemption Q. Which of the following does not fall in the category of unsecured loans of company:

a) Fixed deposits from public b) Loans from promoters c) Debentures from public d) Loans from friends and relatives Q. Which of the following fall under the current liabilities in the balance sheet of a company from managerial view point: a) Loans payable within one year from date of balance sheet b) Advances received from customers against supply of goods c) wages and salaries that have accrued d) All the above Q. Which is the correct order out of the following, for assets classification by a company: a) Fixed assets, investments, misc. expenditure and losses, current assets including loans and advances b) Fixed assets, investments, current assets including loans and advances, misc. expenditure and losses c) Fixed assets, current assets including loans and advances, d) Fixed assets, current assets including loans and advances, misc.expenditure and losses, investments Q. In a balance sheet the trade debtors or debtors are shown: a) At their realizable value b) At the actual recoverable value c) As amount owed to the firm less the provisions for bad debts d) In any of the above manner, as discretion of the company Q. Which of the following group represents the misc. expenditure and loss category of assets, in the balance sheet of a company: a) Preliminary expenses, pre-operative expenses, losses, pre-paid expenses b) Preliminary expenses, pre-operative expenses, losses, outstanding expenses c) Preliminary expenses, pre-paid expenses preoperative expenses, d)Preliminary expenses, pre-operative expenses, losses Q. Cost of sales include which of the following : a) Direct material + direct wages b) Direct material + direct wages + direct overheads called factory overheads c) Direct material - direct wages - direct overheads called factory overheads d) Direct material – direct wages Q. What is financial analysis? a) Assessment of the firm’s past, present and future financial conditions b) It is undertaken to assess firm’s financial strength and weakness c) This indicates a trend of financial health d) All the above 12

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INSTITUTE OF BANKING STUDIES (IBS) Q. The primary tools of financial analysis are; a) Financial statements b) Comparison of financial ratios to past, industry, sector and all firms c) Both a) and b) d) None of the above Q. The financial statements consist of; a) Balance Sheet b) Income Statement c) Cash flow Statement d) All these Q. Which of the followings is a financial statement? a) Statements of Retained Earnings b) Cost Sheet c) Internal Audit Report d) All these Q. What are the sources of data for financial analysis? a) Annual Reports b) Published Data c) Investment Sites on the Web d) All these Q. Which of the following is CORRECT regarding financial statement analysis? a) The value of firm comes from cash flows b) The cash flows are free cash flows c) Free cash flows which are at the disposal of the firm are arrived at after making adjustment of tax and non-cash expenditure d) All the above Q. The major review of Balance Sheet comprises of; a) Current Assets- Cash and Securities, Receivables and Inventories b) Fixed Assets- Tangible and Intangible both c) Current liabilities –Payable and Short term debt d) All the above Q. Analysis for liabilities is also undertaken for; a) Long term liabilities b) Shareholder’s equity c) Both a) and b) d) None of the above Q. Which of the following is CORRECT? a) Gross Profit= Sales – Cost of goods sold b) EBITDA = Gross Profit – Cash operating expense c) EBIT = EBDIT – Depreciation – Amortization d) All the above Q. Which of the following is CORRECT? a) EBT = EBIT – Interest b) EAT = EBY – Taxes c) Net income or Earnings after Tax determines firm’s cash flows d) All the above Q. Gross profit can be calculated as: a) Gross sales – cost of sales b) Gross sales – cost of production c) net sales – cost of sales d) net sales – cost of production Q. Operating expense include which of the following : a) Administrate expenses + selling and distribution expenses + depreciation - direct wages b) Administrate expenses + depreciation + direct wages d) All the above

c) Administrative expenses + selling and distribution expenses + direct wages d) Administrative expenses + selling and distribution expenses + depreciation Q. Operating profit can be calculated as: a) Gross sales – cost of sales – operating expenses b) Net sales – cost of sales – operating expenses c) Gross sales - operating expenses d) Net sales - operating expenses Q. Increase in liabilities of a firm , over a period of one year means: a) Source of funds b) Use of funds c) Movement of funds d) funds flow statement Q. Decline in liabilities of a firm, over a period of one year means: a) Source of funds b) Use of funds c) Movement of funds d) funds flow statement Q. Decline in assets of a firm ,over a period of one year means: a) Source of funds b) Use of funds c) Movement of funds d) funds flow statement Q. Increase in assets of a firm, over a period of one year means : a) Source of funds b) Use of funds c) Movement of funds d) funds flow statement Q. For the purpose of analysis of balance sheet, the liabilities are re-arranged in the following order: a) Net worth, long term liabilities, contingent liabilities b) Net worth, current liabilities, contingent liabilities c) Net worth, long term liabilities, current liabilities, contingent liabilities d) Net worth, contingent liabilities, long term liabilities, current liabilities Q. For analyzing the balance sheet, the assets are arranged in the following order: a) Current assets, non-current assets, intangible assets, fixed assets b) Fixed assets, current assets, non-current assets, intangible assets c) Current assets, non-current assets, intangible assets, fixed assets d) Fixed assets, non –current assets, current assets, intangible assets Q. Which of the following items would be treated to be not matched properly for classification: a) Non-moving inventory: on-current asset b) Installment of term loan due within one year: current liability c) Receivables more than 4 months old: noncurrent asset d) Contingent liabilities: not to be part of main balance sheet. To be shown as foot note in notes on accounts. Q. The objective of Ratio analysis are; a) Standardise financial information for comparison b) Evaluate current operations c) Compare performance with past performance 13

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INSTITUTE OF BANKING STUDIES (IBS) Q. Which of the following is NOT objective of financial ratio analysis? a) Evaluate internal control methods b) Compare performance against other firms c) Study efficiency of operations d) Study risk of operations Q. The rationale behind ratio analysis is to understand the ways in which firm’s situation deviates from; a) Its won past b) other firms c) the industry d) All these Q. The purpose of financial ratios are; a) Liquidity Ratio – to assess ability to cover current obligations b) Leverage Ratio – to assess ability to cover long term debt obligations c) Both a) and b) d) None of the above Q. The operational Ratios aim for; a) Activity Turnover) Ratio – to assess amount of activity relative to amount of resources used b) Profitability Ratios – to assess profits relatives to amount of resources used c) Valuation ratio – to assess market price relative to assets or earnings d) All the above Q. Which of the following is CORRECT regarding current ratio? a) Current ratio = Current Assets/ Current Liabilities b) 2:1 is an deal ratio c) Higher is better d) All the above Q. The features of Acid Test Ratio are; a) Acid Test Ratio = Current Assets – inventories/ Current Liabilities b) It indicates immediate liquidity position of the firm c) The value of inventories is reduced from Current Assets as they cannot be disposed off immediately d) all the above Q. The Net Present Value NPV), Market Value Added MVA) and Economic Value Added EVA) depend on; a) Expected Cash n flows b) Timings of cash flows c) Risk of Cash flows d) All these Q. Which of the following a affects the stock price? a) The expected cash flows, their timings and risk b) NPV c) Market conditions d) All the above Q. The Cash Ratio is; a) Cash + Marketable Securities/ Current Liabilities b) It indicates the extent of cash and near cash securities are sufficient to meet current liabilities c) Both a) and b) d) None of the above Q. The features of Debt Equity Ratio are; Q. Which of the following group of ratios is part of

a) DE Ratio = Long term debt/Net worth b) Debt to Asset Ratio = Long term debt/ Net Assets c) Total outside liabilities {TOL} to net worth ratio = TOL/Net worth d) All the above Q. What is Debt Coverage Ratio? a) Firm’s capacity to services its debt obligations b) Higher is the coverage, it is better for lender perspective c) Both a) and b) d) None of the above Q. The significant of interest coverage ratio is; a) = Profit before interest and Taxes (PBIT)/ Interest Obligation b) It indicates sufficiency of PBIT it meet interest obligations c) Higher the ratio, more cushion available to lenders d) All the above Q. Interest Coverage Ratio on cash basis is; a) =PBIT + Depreciation +) --) Non –cash Expenditure/ Income divided by interest obligation b) It indicates cash available for interest obligation c) Both a) and b) d) None of the above Q. Fixed Charge or Debt Service Coverage Ratio signifies; a) It indicates the capacity of the firm to serve the interest and principal repayment of the loan b) The Ratio is calculated as PAT + Depreciation + Non Cash expenses/ Interest + Principal Repayment c) It indicates the availability of cash with the firm d) All the above Q. In trend analysis of the financial statements: a) Data is taken for a no. of years relating to important financial information b) Data id taken for a no. of years relating to all financial information c) Data id taken for few years relating to important financial information d) Data id taken for few years relating to all financial information Q. A financial ratio is: a) Division of one figure by another figure only b) Multiplication of one figure by another figure only c) Relationship between two or more financial variables d) Any of these Q. A ratio can be expressed as: a) A percentage only b) A proportion only c) No. of times only d) Any of these Q. Which of the following group of ratios indicate the capacity of a firm to meet its short term obligations: a) Debt equity ratio, current ratio b) Current ratio, stock turnover ratio c) quick ratio, current ratio d) quick ration, debt equity ration 14

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INSTITUTE OF BANKING STUDIES (IBS) capital structure rations or leverage ratios: a) Return on equity, debt equity ratio b) Return on capital ,debt equity ratio c) TOL/TNW, current ratio d) Debt equity ratio, TOL/ TNW ratio Q. Interest coverage ratio is calculated as: a) Profit /interest payments b) Profit before tax and interest/ interest payments c) Profit before tax and interest/ interest on long term liabilities d) Profit before tax and interest/ interest on long term liabilities and working capital loans Q. (Profit after tax + depreciation + term loan interest) / (installment of term loan + interest on term loan) gives: a) Interest coverage ratio b) Debt service coverage ratio c) Debt equity ratio d) Total outside liabilities ratio Q. The ratio that provides information about cash flow before interest to total long term liability repayment obligation is called: a) Interest coverage ratio b) Debt service coverage ratio c) Debt equity ratio d) Total outside liabilities ratio Q. The ratio that indicates the movement of inventory is called: a) Working capital turnover ratio b) Debtor turnover ratio c) Stock turnover ratio d) Quick ratio Q. What does profitability ratio indicate? a) Ability to generate earnings of a firm b) The Ratio consist of profit margin, return on capital employed, return on Assets etc c) Higher Ratio indicates better performance d) All the above Q. The Ratio of value addition signifies; a) It signifies the enhancement made to the value of a product b) Higher the value added as percentage of sales, it is better for the firm c) The Ratio is calculated as Sales – Purchases/ Sales x 100 d) All the above Q. What is contribution margin? a) It signifies the margin available once the valuable cost have been covered b) The margin goes to meet the cost and remaining for profit c) This equals =Sales – Variable cost) d) All the above Q. What is gross profit margin? a) It indicates excess of total sales revenue over the cost of goods sold b) It reflects productive efficiency a) = Net worth / Number of shares

c) Higher the profit margin, more is the cushion to meet overheads d) All the above Q.Gross profit margin signifies; a) It reflects proportion of sales revenue for paying Administrative expenses b) Gross profit margin = Sales—Cost of Goods Sold/ Sales x 100 c) It reflects firm’s ability to meet production expenses d) All the above Q. The poor profit indicates; a) Inability of the firm to procure inputs at competitive prices b) Selling finished products at lower price c) Poor utilization of production capacity d) All the above Q. Net Profit margin signifies; a) Net margin as percentage of sales overall profitability of business b) Net Profit margin = PAT/ Sales x 100 c) Both a) and b) d) None of the above Q. Return on capital employed {ROCE) signifies; a) Efficient use of capital by a firm b) ROCE = EBIT (I-T)/ Net Assets x 100 c) T is the Tax Rate d) All the above Q. ROCE reflects; a) Post Tax earning power b) Comparison with the cost of capital c) If ROCE is greater than weighted average cost of capital, the firm is efficient d) All the above Q. Return on Equity (ROE) is; a) It indicates the Returns to equity holders b) Increased ROE indicates improved efficiency c) ROE =PAT/ Net worth x 100 d) All the above Q. What is Earning per shares? a) Profit earned per share b) It measures financial performance c) EPS =PAT/ Number of share outstanding d) All the above Q. The divided per share (DPS) signifies; a) The amount of dividend a shareholder receives per share b) DPS = Dividend/ Number of Shares outstanding c) It directly effects the share price d) All the above Q. What is Price Earning Ratio {PER}? a) It indicates how much an investor is willing to pay per rupee of reported profit b) It also reflects higher lend of confidence c) PE Ratio = Market price/ Earning per share d) All the above Q. Market Value to Block Value Ratio is; 15

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INSTITUTE OF BANKING STUDIES (IBS) b) It indicates the extent to which the profits have been retained in the Business on a per share basis c) Both a) and b) d) None of the above Q. What is Dupont System? a) It is method to breakdown ROE into ROA and Equity Multiplier b) ROA is further broken does as profit margin and Asset turnover c) It helps to identify sources of strength and weakness in current performance d) All the above Q. Which of the following is CORECT; a) Equity Multiplier = Total Assets. Equity b) Profit Margin = Net income/ Sales c) Total sales turnover – Sales / Total Assets d) All the above Q. Financial Ratio analysis helps in; a) Evaluating performance b) Structure analysis c) Showing connection between activities and performance d) All the above’ Q. The limitations of Financial Ratio are; a) Published industry average are only guidelines b) Accounting Practices differ across firms c) Seasonality affect ratios d) All the above Q. Which of the following is TRUE regarding ratio analysis? a) The balance Sheet has prescribed format as per the Companies Act b) Short term Financial Securities are classified under investments c) Banks subtract the amount of Intangible Assets to arrive at Tangible Assets d) All the above Q. Which of the following is FALSE? a) Investment in 3 years bond can be classified as short term investments b) Inventory valuation method if changed in the accounting year does not affect the profit c) Ratio analysis method is a perfect method d) All the above Q. Which of the following is FALSE? a) Interest Coverage Ratio is calculated by dividing EBIT by total interest b) Debt-Equity Ratio signifies total outside liability to the net worth c) DSCR is an indicator that firm is competent to meet principal and interest obligations d) All the above Q. Which of the following is NOT TRUE? a) Contingent liabilities do not affect the financial analysis of a firm b) Liquidity ratio is meant for meeting short term obligations

c) Final flow statement and statement of sources and uses of funds are the same d) All the above Q. In the Balance Sheet of a firm, the debt equity ratio is 2:1. The amount of long term sources is Rs.12 lac. What is the amount of tangible net worth of the firm? a) Rs.12 lac b) Rs.8 lac c) Rs.4 lac d) Rs.2 lac Q. Debt Equity Ratio is 3:1, the amount of total assets Rs.20 lac, current ratio is 1:5:1 and owned funds Rs.3 lac. What is the amount of current asset? a) Rs.5 lac b) Rs.3 lac c) Rs.12 lac d) None of these Q. Banks generally prefer Debt Equity Ratio is; a) 1:1 b) 1:3 c) 2:1 d) 3:1 Q. Stock turnover ratio is calculated as: a) Cost of goods sold/average inventory b) Sales/ average inventory c) Cost of goods sold /inventory d) Sales/inventory Q. Debtor turnover is calculated as: a) Cost of goods sold/average debtors b) Sales/ average debtors c) Cost of goods sold /debtors d) Sales/debtors Q. Which of the following statement is not correct: a) Net worth minus intangible = tangible net worth b) Net worth + long term liabilities = long term sources c) Long term liabilities + current liabilities + total liabilities d) Current liabilities = short term sources Q. Which of the following a most appropriate representation of tangible net worth: a) Capital – intangible assets b) Capital + reserves + long term loans – intangible asset c) Capital + reserves – fictitious assets d) Capital + reserves -– intangible assets fictitious assets Q. The quick assets can be calculated as: a) Current assets – stocks – prepaid expenses b) Current assets + book debts – prepaid expenses c) Current assets – book debts –cash d) Book debts + cash + prepaid expenses Q. Net working capital can be calculated as: a) Long term sources – long term uses b) Current assets + current liabilities c) Current assets – stocks & prepaid expenses Q. Which of the following statements is not correct: a) Fixed assets + non-current assets + intangible assets = long term uses b) Net worth + long term liabilities + current liabilities = long tern sources c) Current assets = short term uses d) Current liabilities + long term liabilities = total outside liabilities 16

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INSTITUTE OF BANKING STUDIES (IBS) Q.The total liabilities of a firm are 50, its long term uses 20 and long term sources 30. a) Current assets = 50 and current liabilities = 20 b) Current assets = 30 and current liabilities = 20 c) Current assets = 20 and current liabilities = 30 d) None of the above is correct Q. The total assets of a firm are 80 and its long term sources are 50 and net worth 20 a) Current liabilities are 30 b) Current liabilities are 10 c) Total outside liabilities are 70 d) Current liabilities cannot be worked as information is incomplete Q. Which of the following is correct: a) Net worth 50, long term sources 140& current liabilities 50. Total assets = 190 b) Net worth 30, long term sources 120& current liabilities 40. Total assets = 190 c) Net worth 10, long term liabilities 40& current liabilities 50. Total assets = incomplete information d) Total assets = 100, net worth 20, long term sources 70& current liabilities =10 Q. Cash 10, capital 16, bank overdraft 12, machinery 15, stocks 12, term loan 22, debtors 13: a) Current assets = 50 b) Current liabilities = 34 c) Long term sources = 38 d) Long term uses =28 Q. Cash 12, capital 14, bank overdraft 10, machinery 15, stocks 12, reserves 10, term loan 12, debtors13, preliminary expenses 4, pre-paid expenses 2 (which of the following not correct); a) Current assets = 37 b) Long term sources = 36 c) Tangible net worth = 20 d) net worth =24 Q. Cash generation /cash profit or cash accrual, means : a) Profit + depreciation b) Profit less depreciation c) Net profit d) None of the above Q. Which of the following is a contingent liabilities: a) Liability on account of letter of credit, letter of guarantee, provisions not made etc. b) Liability on account of guarantee given by a firm on behalf of another firm c) Court case filed against a firm by another firm d) All the above Q. If a company revaluates its assets, the net worth or tangible net worth and debt equity ratio: a) Will improve b) Will remain unaffected c) Net worth would change but not debt equity ratio d) debt equity ratio would change but not net worth

Q. A joint stock company’s total assets are Rs. 45 cr which include intangible assets worth Rs. 2 cr. Its liabilities other than share capital and reserves are Rs. 40cr. What is the amount of tangible net worth? a) 3 cr b) 7 cr c) 5 cr d) 2 cr Q. A balance sheet shows total liabilities at Rs. 10 lac, current liabilities at Rs. 5 lac and long term debt Rs. 2 lac and debit balance of profit and loss account at Rs. 1 lac. The tangible net worth is : a) Rs. 2 lac b) Rs. 4 lac c) Rs. 3 lac d) None of the above Q. Which of the following formula of a ratio is incorrect: a) Debtor turnover ratio = sales /debtors b) Debt collection period = debtors / monthly sales c) Return on equity = Net profit /tangible net worth d) Fixed assets + non- current assets + intangible assets- long term sources of funds Q. Current ratio calculation is not correct for: a) CA 45 and CL 30. Current ratio = 1.5:1 b) CA 45 and CL 60. Current ratio = 0.9:1 c) CA 75 and CL 75. Current ratio = 1.0:1 d) CA 90 and CL 150. Current ratio = 0.6:1 Q. If a company revalues its assets, its net worth will; a) Improve b) remain same c) be positively affected d) None of these Q. If a company issues bonus shares the debt equity ratio will; a) remain unaffected b) be affected c) improve d) None of these Q. An asset is a; a) Source of fund b) Use of fund c) Inflow of funds d) None of these Q. In a balance sheet amount of total assets is Rs.10 lac, current liabilities Rs.5 lac and capital & reserves are Rs.1 lac. What s the debt equity ratio? a) 1:1 b) 1:5:1 c) 2:1 d) None of these Q. The long term use is 120% of long term source. This indicates the unit has; a) current ratio 1:2:1 b) Negative TNW c) Low capitalization d) Negative NWC Q. In last year the current ratio was 3:1 and quick ratio was 2:1. Presently current ratio is 3:1 but quick ratio is 1:1. This indicates comparably; a) High liquidity b) higher stock c) lower stock d) low liquidity Q. Authorized capital of a company is Rs.5 lac, 40% of its is paid up. Loss incurred during the year is Rs.50,000. Accumulated loss carried from last year is Rs.2 lac. The company has a Tangible Net Worth of; a) Nil b) Rs.2.50 lac c) (--) Rs.50,000 d) Rs.1 lac 17

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INSTITUTE OF BANKING STUDIES (IBS) Q. The degree of solvency of two firms can be compared by measuring; a) Net Worth b) Tangible Net Worth c) Asset Coverage Ratio d) Solvency Ratio Q. Proprietary ratio is calculated by; a) Total assets/ Total outside liability b) Total outside liability/ Total tangible assets c) Fixed assets, Long term source of fund d) Proprietors’ Funds/Total Tangible Assets Q. Current ratio of a concern is 1, its net working capital will be; a) Positive b) Negative c) Nil d) None of these Q. Current ratio is 4:1. Net Working Capital is Rs.30,000.Find the amount of current Assets. a) Rs.10, 000 b) Rs.40, 000 c) Rs.24, 000 d) Rs.6, 000 Q. Current ratio is 2:5. Current liability is Rs.30, 000. The Net working capital is; a) Rs.18, 000 b) Rs.45, 000 c) Rs.--) 45, 000 d) Rs. --) 18, 000 Q. Quick assets do not include; a) Government bond b) Book debt c) Advance for supply of raw materials d) Inventories Q. The ideal quick ratio is; a) 2:1 b) 1:1 c) 5:1 d) None of these Q. A very high current ratio indicates; a) High efficiency b) Flabby inventory c) Position of more long term funds d) b) or c) Q. Financial leverage means; a) Use of more debt capital to increase profit b) high degree of solvency c) Low bank finance d) None of the above Q. The capital gearing ratio is high for a company. It indicates a position of; a) Low debts b) High preference capital c) high equity d) Low debt equity ratio Q. Which of the following would be considered a “use” of cash for purposes of constructing a statement of cash flows? a) A decrease in accounts receivable b) An increase in accounts payable c) An increase in common stock d) A decrease in bonds payable Q. Which of the following would be considered a “source” of cash for purpose of constructing a statement of cash flows? a) An increase in accounts payable b) Dividends paid to the company’s own shareholders c) A decrease in accrued liabilities d) A decrease in accounts receivable

Q. Under the indirect method, which item would be deducted from net income as part of the process of arriving at cash provided by operating activities on the statement of cash flows? a) Patent amortization expense b) Increase in accounts payable c)Increase in prepaid expenses d) Decrease in accounts receivable Q. In a statement of cash flows, all of the following would be classified as operating activities except; a) Interest paid to creditors b) dividends received on stock in another company held as in investment c) dividends paid to the company’s own common stockholders d) interest received on a long-term note receivable Q. A decrease in the plant and equipment account of $ 100, 000 over the course of a year would be shown on the company’s statement of cash-flows prepared under the indirect method as; a) an addition to net income of $ 100, 000 in order to arrive at net cash provided by operating activities b) a deduction from net income $ 100,000 in order to arrive at bet cash provided by operating activities c) An addition of $ 100, 000 under investing activities d) a deduction of $ 100,00 under investing activities Q. A company declared and paid a cash dividend. The dividend would appear on the company’s statement of cash flows as; a) an addition to net income in order to arrive at net cash provided by operating activities under the indirect method b) a deduction from net income in order to arrive at net cash provided by operating activities under the indirect method c) a deduction under investing activities d) a deduction under financing activities Q. In the statement of cash flows, the sum total of the net cash provided by operating activities, investing activities, and financing activities would be equal to; a) Zero b) the beginning balance of cash and cash equivalents c) the ending balance of cash and cash equivalents d) the increase or decrease in cash and cash equivalents Q. Which of the following should be classified as a financing activity on a statement of cash flows? a) Cash used to retire bonds payable b) An increase in deferred income taxes c) Cash dividends received on an investment in stock d) None of the above 18

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INSTITUTE OF BANKING STUDIES (IBS) Q. Common size financial statements help an analysis to; a) evaluate financial statements of companies within a given industry of the approximate same size b) determine which companies in a similar industry are at approximately the same stage of development c)compare the mix of assets, liabilities, capital revenue, and expenses, within a company over a period of time or between companies within a given industry without respect to size d) ascertain the relative potential of companies of similar size in different industries Q. The market price of Friden Company’s common stock increased from $ 15 to $ 18. Earnings per share of common stock remained unchanged. The company’s price-earnings ratio would; a) increase b) decrease c) remain unchanged d) Impossible to determine Q. If a company is profitable and is effectively using leverage, which one of the following ratios is likely to be the largest a) Return on total assets b)Return on total liabilities c) Return on common stockholder’s equity d)Cannot be determined Q. Stocks 30, investment in other firms 20, sundry debtor 40, preliminary expenses 5, cash 10, sundry creditors 20, bank overdraft balance 20. Which of the following is not correct: a) Current ratio = 2:1 b) Quick ratio = 1:1 c) Short term uses = 80 d) Net working capital = 40 Q. Long term uses of firm are 40, total liabilities 120. Its current ratio is 2:1 a) Current liabilities = 50 and current assets = 100 b) Current liabilities = 40 and current assets = 80 c) Current liabilities = 60 and current assets = 120 d) Current liabilities = 20 and current assets = 40 Q. Total assets of a firm are 200 and long term sources 120. The current ratio 2:1 a) Current liabilities = adequate information not a available b) Current assets = 160 c) Long term uses = 80 d) Net working capital = 100 Q. Stock 60, sundry debtor 50( including debtor above 6 months 10), cash 20, security deposits 20, preliminary expenses 5, trade creditors 30, bank cash credit 30, provisions and expenses payable 10, term loan installment payable in 12 months 10. Which of the following is not correct: a) Current ratio = 1.5:1 b) Quick ratio = 0.75:1 c) Working capital = 130 d) Net working capital = 40

Q. Ad per balance sheet of a firm the current ratio works out to be 2:1 and the net working capital at Rs. 50000. What will be amount of current liabilities? a) Rs. 1 lac b) Rs. 50000 c) Rs. 2 lac d) Rs. zero Q. Current ratio of a firm remained 1.5:1 for 2 years and quick ratio has declined to0.75:1 in the 2nd year compared to 0.90:1 in the 1st year. It may be due to: a) Increase in quick assets b) Decrease in current assets c) %age of quick assets within total current assets has decreases d) %age of stocks & pre-paid expenses within total current assets has decreased Q. If a firm realizes its sundry debtors: a) Its current assets and quick assets increase b) Its current ratio increases and quick ratio remains unchanged c) Its current ratio remains same but quick ratio increase d) Its current ratio and quick ratio remain same Q. If a firm sells its stock for cash or credit: a) Its current assets and quick assets increase b) Its current ratio increases and quick ratio remains unchanged c) Its current ratio remains same but quick ratio increase d) Its current ratio and quick ratio remain same Q. The balance sheet of a firm has shown total assets of Rs. 20 lac. The long term uses are Rs. 11 lac and current ratio 1.5:1 .What is the amount of current liabilities: a) Rs. 11 lac b) Rs. 9 lac c) Rs. 6 lac d) Rs. 4 lac Q. A company has just converted a long-term note receivable into a short-term note receivable. The company’s acid-test and current ratios are both greater than 1. This transaction will; a) increase the current ratio and decrease the acidtest ratio b) increase the current ratio and decrease the acid-test ratio c) decrease the current ratio and increase the acidtest ratio d) decrease the current ratio and decrease the acidtest ratio Q. Broca Corporation has a current ratio of 2.5. Which of the following transactions will increase Broca’s current ratio? a) Purchase of inventory for cash b) The collection of an account receivable c) The payment of an account payable d) None of the above Q. Allen Company’s average collection period of accounts receivable was 25 days in year 1, but increased to 40 days in year 2. Which of the following would most likely be the cause of this change? 19

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INSTITUTE OF BANKING STUDIES (IBS) a) A decrease in accounts receivable relative to sales in year 2 b) An increase in credit sales in year 2 as compared to year 1 c) A relaxation of credit policies in year 2 d) A decease in accounts receivable in year 2 as compared to year 1 Q. Wolbers Company wrote of $ 100,000 in obsolete inventory. The company’s inventory turnover ratio would; a)increase b) decrease c) remain unchanged d) impossible to determine Q. A firm has a higher quick or acid test) ratio than the industry average, which implies; a) the firm has a higher P/E ratio than other firm in the industry b) the firm is more likely to avoid insolvency in short run than other firm in the industry c) the firm may be less profitable than other firms in the industry d) a) and b) e) b) and c) Q. An example of a liquidity ratio is ------------: a) Fixed asset turnover b) current ratio c) acid test or quick ratio d) (a) and (b) e) (b) and (c) Q. ---------- a snapshot of the financial condition of the firm at a particular time. a) The balance sheet provides b) The income statement provides c) The statement of cash flows provides d) All of the above provides e) None of the above provides Q. ----------- of the cash flow generated by the firm’s operations, investments and financial activities. a) The balance sheet is a report b) The income statement is a report c) The statements of cash flows is a report d) The auditor’s statements of financial condition e) None of the above is a report Q. A firm has a higher asset turnover than the industry average, which implies; a) the firm has a higher P/E ratio than other firm in the industry b) the firm is more likely to avoid insolvency in the short run than other firm in the industry c) the firm is more profitable than other firm in the industry d) the firm is utilizing assets more efficiently than other firm in the industry e) the firm has higher spending on new fixed assets than other firm in the industry Q. If you wish to compute economic earnings and are trying to decide how to account for inventory ----------.

a) FIFO is better than LIFO b) LIFO is better than FIFO c) FIFO and LIFO are equally good d) FIFO and LIFO are equally bad e) None of the above Q. ----------- of the profitability of the firm over a period of time such as a year. a) The balance sheet is a summary b) The income statement is a summary c) That statement of cash flows is a summary d) The audit report is a summary e) None of the above is a summary Q. Given the results of the study of Clayman, you would --------- the stock of firms with high ROEs and -------- the stocks of firms with low ROEs. a) want to buy, want to buy b) want to buy, not want to buy c) not want to buy, want to buy d) not want to buy, not want to buy e) be unable to buy, want to buy Q. Over a period of thirty-odd years in managing investments funds, Benjamin Graham used the approach of investing in the stocks of companies where the stocks were trading at less than their working capital value. The average return from using this strategy was approximately ----------. a) 5% b) 10% c) 15% d) 20% e) None of the above Q. A study by Speidell and Bavish 1992) found that when accounting statements of foreign firms were restated on a common accounting basis; a) the original and restated P/E ratios were quite similar b) the original and restated P/E ratios varied considerably. c) Most variation was explained by tax differences d) most firms were consistent in their treatment of goodwill e) None of the above Q. If the interest rate on debt is higher than ROA, then a firm will --------- by increasing the use of debt in the capital structure. a) increase the ROE b) not change the ROE c) decrease the ROE d) change the ROE in an indeterminable manner e) None of the above Q. A firm has a market to book value ratio that is equivalent to the industry average and an ROE that is less than the industry average, which implies -----a) the firm has a higher P/ E ratio than other firms in the industry b) he firm is more likely to avoid insolvency in the short run that other firms in the industry c) the firm is more profitable than other firms in the industry d) the firm is utilizing its assets more efficiently than other firms in the industry e) None of the above 20

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INSTITUTE OF BANKING STUDIES (IBS) Q. In periods of inflation, accounting depreciation is -------- relative to replacement cost and real economic income is ----------. a) overstated, overstated b) overstated, understated c) understated, overstated d) understated, understated e) correctly, correctly Q. If a firm has a positive tax rate, a positive ROA, and the interest rate on debt is the same as ROA, then ROA will be ----------. a) greater than the ROE b) equal to the ROE c) less than the ROE d) greater than zero but it is impossible to determine how ROA will compare to ROE e) negative in all cases Q. A firm has a P/E ratio of 12 and a ROE of 13% and a market to book value of ----------. a) 0.64 b) 0.92 c) 1.08 d) 1.56 Q. A firm has an ROE of -2%, a debt /equity ratio of 1.0, a tax rate of 0%, and an interest rate on debt of 10%. The firm’s ROA is -------------. a) 2% b) 4% c) 6% d) 8% e) None of the above Q. A firm has a net profit/pretax profit) ratio of 0.6, a leverage ratio of 2, a pretax profit/EBIT) of 0.6, an asset turnover ratio of 2.5, a current ratio of 1.5, and a return on sales ratio of 4%. The firm’s ROE is -----a) 4.2% b) 5.2% c) 6.2% d) 7.2% e) None of the above Q. A measure of asset utilizations is -----------. a) Sales divided by working capital b) return on total assets c) return on equity capital d) operating profit divided by sales e) None of the above Q. Fundamental analysis is uses ---------. a) earnings and dividends prospects b) relative strength c) price momentum d) (a) and (b) e) (a) and (c) Q. Which of the following would best explain a situation where the ratio of net income/total equity) of a firm is higher than the industry average. While the ratio of net income/total assets) is lower than the industry average? a) The firm’s net profit margin is higher than the industry average b) The firm’s asset turnover is higher than the industry average c) The firm’s equity multiplier must be lower than the industry average d) The firm’s debt ratio is higher than industry average e) None of the above Q. If a firm’s ratio (of total liabilities/ total assets) is higher than the industry average while the total capitalization (of the firm’s stockholder’s equity) is lower than the industry average, the most likely

assumption is that the firm -----------. a) has more current liabilities than the industry average b) has more leased assets than the industry average c) will be more profitable than the industry average d) has more current assets than the industry average e) None of the above Q. What best explains why a firm’s ratio of long-term debt/ total capital) is lower than the industry average, while the ratio of income before interest and taxes/ debt interest charges) is lower than the industry average? a) The firm pays lower interest on long-term debt than the average firm b) The firm has more short-term debt than average c) The firm has a high ratio of current assets/current liabilities) d) The firm has a high ratio of total cash flow/long term debt) e) None of the above Q. ------------ best explains a ratio of sales/average net fixed assets) that exceeds the industry average. a) The firm expanded plant and equipment in the past few years b) The firm makes less efficient use of assets than competing firms c) The firm has a substantial amount of old plant and equipment d) The firm uses straight-line depreciation e) None of the above Q. A firm is having the following balance sheet figures: a) Capital and reserves 2 lac b) Long term loans 2 lac c) Current liabilities 3 lac d) Long term uses 3 lac What will be current ratio? a) 2:1 b) 1.5:1 c) 1.33:1 d) 1.25:1 e) None of the above Q. A firm revalues its land and building from Rs. 40lac to Rs.100 lac. It current ratio before this revaluation was 1.33:1 with current liabilities of Rs. 100 lac. What will be new current ratio? a) 1.17:1 b) 1.25:1 c) 1.33:1 d) 1.50:1 e) 1.75:1 Q. Current ratio of a unit is 3:1 and quick ratio 1:1. The level of current assets is Rs. 15 lac. What is the amount of quick assets? a) 3 lac b) 4 lac c) 5 lac d) 6 lac e) 7 lac Q. The balance sheet of firm reveals that its current assets are Rs.300 lac and long term sources of Rs. 300 lac. If total of the balance sheet is Rs. 500 lac what is the amount of net working capital and current ratio? 21

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INSTITUTE OF BANKING STUDIES (IBS) a)Rs. 200 lac and 1:1 b) Rs. 200 lac and 1.5:1 c) Rs. 100 lac and 1.5:1 d) Rs. 50 lac and 2:1 e) Rs. 150 lac and 1.5:1 Q. Net working capital is Rs. 8 lac and the current ratio 1.5:1. The amount of current assets is : a) 8 lac b) 16 lac c) 24 lac d) Inadequate information Q. Debt- equity ratio if worked out as: a) Long term liabilities/net worth b) Total outside liabilities / tangible net worth c) Long term liabilities / tangible net worth d) Long term sources / net worth Q. Debt-service coverage can be calculated as: a) Long term liabilities /tangible net worth b) (net profit + depreciation ) term loan installment c) (net profit + depreciation + term loan interest )/ term loan installment d) (net profit + depreciation + term loan interest )/ (term loan installment + TL interest) Q. Capital and reserves 45, debentures and term loans 80, creditors and provisions 10, preoperative expenses 5 and pre-paid expenses 5. The debt equity ratio is : a) 2.25:1 b) 2:1 c) 1.5:1 d) 1:1 Q. Which of the following statement is correct: a) Increasing debt-equity ratio is a sign of improvement of repayment capacity of the firm b) Decreasing debt-equity ratio is a sign of deterioration of solvency of the firm c) Declining debt-equity ratio is a sign of improvement of solvency of the firm d) Increasing debt-equity ratio indicate increasing long term liabilities and decline in net worth Q. Comparison of balance sheet of firm for two years, it is observed that its debt equity ratio has increased from 1.5:1 to 2:1 but its current ratio and the total of balance sheet has not changed . Which of the following is possibly true in this regard: a) The amount of net worth has increased b) The amount of long term liabilities ahs declined c) The amount of intangible assets has decreased d) The long term liabilities have increased or net worth declined or intangible assets have increased Q. Capital 40, debentures & term loans 50, creditors 10, bank limit 30, goodwill 10, prepaid expenses 10, stocks 20& debtors 25 (which is not correct): a) Current ratio = 1.38:1 b) Quick ratio = 0.63:1 c) debt equity ratio = 1.67:1 d) None of the above Q. Net profit 60, depreciation40, term loan interest 20, term loan balance 300, TL installment 40, capital and reserves 150

a) DSCR ratio 2 and debt equity ratio 2:1 b) DSCR ratio 1.5 and debt equity ratio 2:1 c) DSCR ratio 2 and debt equity ratio 1.5:1 d) DSCR ratio1.8 and debt equity ratio 1.7:1 Q. Total assets 80& current liabilities are 20. Current ratio is 1.5:1 and debt equity ratio 2:1. Which is not correct: a) Net worth =20 b) Current assets = 30 c) Total outside liabilities = 60 d) Long term uses = 40 Q. In a balance sheet of a firm, the debt equity ratio is 2:1. The amount of long term sources is Rs. 12 lac. The amount of tangible net worth of the form is : a) Rs. 12 lac b) Rs. 8 lac c) Rs. 4 lac d) Rs. 2 lac Q. Total liabilities of a firm are Rs. 70lakhs of which term liabilities are Rs. 25lakhs. Current assets are Rs. 40lakhs and current ratio is 2:1. The net worth of the firm will be : a) Rs. 25 lakhs b) Rs. 20 lakhs c) Rs. 45 lakhs d) Rs. 30 lakhs e) 50 lakh Q. A company has stock of Rs.10 and it s stock turnover ratio 12. What is the amount of sales: a) 120 lac b) 1.20 lac c) 83 lac d) 58 lac Q. What is indicated by the high debtors’ turnover ratio, of a business firm? a) The firm is efficiently collecting its receivables b) The firm is slow in collection of its book debts c) The firm is having very high level of book debts d) The firm is having low sales compared to book debts Q. A firm is having very high stock turnover ratio, which indicates that : a) The firm is having very high amount of stocks b) Firm has low level of sales compared to its stocks c) The firm is able to use its stocks inefficiently d) The firm is able to use its stocks efficiently Q. A firm has 3 month’s debt collection period. Its sales are Rs. 180 lac. What is the amount of average book debts: a) Rs. 48 lac b) Rs. 45 lac c) Rs. 36 lac d) None of the above Q. What is working capital? a) Current Assets- Current Liabilities b) Investment in Current Assets c) Receivable d) Working capital gap Q. The Current Assets comprises of; a)Cash b) Marketable Securities c) Accounts Receivable d) All these 22

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INSTITUTE OF BANKING STUDIES (IBS) Q. Which of the following is Current Assets for the purpose of working capital? a) Long term investments b) Current liabilities c) Investment in marketable securities d) Overdraft from Bank Q. Which of the following is CORRECT regarding working capital? a) It determines liquidity position of a firm b) Higher investments is better for financial health c) The difference between current assets and current liabilities is working capital gap d) All the above Q. What is gross working capital? a) It is total investment in Current Assets b) Higher the gross working capital it increases the carrying cost c) It also denotes high liquidity position d) All the above Q. What are the consequences of higher gross working capital? a) It adversely affect the profitability of the firm b) Higher inventory may cause obsolescence c) It may also cause slow sown in the turnover d) All the above Q. The Net Working Capital (NWC) is; a) Current Assets – Current Liabilities b) The different between the two is financed though long term sources c) The gap can also be met through short term sources d) All the above Q. Which of the following are consequences for using increased long term sources for working capital requirements? a) This improves firm’s liquidity position b) It also increases cost of funds c) Both a) and b) above d) None of the above Q. Which of the following are affected by working capital decisions? a) Profits b) Operating costs c) Interest expenses d) All the above Q. Which of the following operations of a firm has direct impact on working capital? a) Increased product decisions b) Liberalized credit-policy c) Increased inventory level d) All the above Q. How does working capital affect the Risk of the firm? a) Variability of cash flows b) Probability of not receiving the cash flows c) Ability of the firm to generate cash in the crisis d) All the above Q. Which of the following operational decisions affect the working capital?

a) Increased inventory requirement of production department b) Liberalized credit policy to market department c) Both a) and b) d) None of the above Q. Which of the following is CORRECT regarding working capital? a) Shorter the operating cycle lower the working capital requirement b) A company producing heavy machine tools requires longer operating cycle c) A company under b) needs longer working capital d) All the above Q. Which of the following is NOT CORRECT regarding working capital? a) Firms having cash sales needs more working capital b) Seasonal industry needs working capital in the peak season c) Highest level of working capital s maintained by a Trading firm d) The liabilities are of short term and long term nature Q. What is operating cycle? a) Total duration taken to compete one cycle of operations b) It is the time taken to turn the investment of cash back into cash c) It begins with procurement of inputs and end with realization of credit sales d) All the above Q. Which of the following are the activities for a manufacturing firm? a) Procurement of inputs b) Transaction of inputs into outputs c) Distribution of output d) All the above Q. What is Inventory Conversion period? a) The total time involved from the procurement of inputs till the conversion of inputs into outputs b) It has three stages viz; raw material conversion period, work in progress conversion period and finished goods conversion period c) Both a) and b) d) None of the above Q. The Receivable Conversion period consists of; a) Time lag in conversion credit sales into cash b) The credit period is important factor c) It is also referred as Account Receivable conversion d) All the above Q. The payable deferred period is; a) The period for which the firm can defer the payment b) Longer the period, the firm will need lessor working capital requirement c) Both (a) and (b) d) None of the above 23

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) Q. Firm A’s debtor is 60 and stock 50. Its sales are 1200. Which of the following is not correct: a) Debtors’ turnover ratio = 20 times b) Stock turnover ratio = 24 times c) Debt collection period = 0.6 months d) None of the above Q. Firm A’s sales 1000, debtors 100 and stocks 50. Firm B’s sales are 1800, debtors 125 and stocks 150. a) Firm A has better stock management and firm A has better debtor management b) Firm B has better stock management and firm B has better debtor management c) Firm A has better stock management and better debtor management d) Firm B has better stock management and better debtor management Q. Net profit of a firm is 40. It tangible net worth 400 and long term liabilities 400. a) Its return on equity is 10% b) Its return on equity is 20% c) Its return on investment is 10% d) Its return on investment is 10% Q. A firm’s net profit to sales ratio is 5% and profits of 80 Its stocks turnover ratio is 20 times. a) Its sales are 1600 and stocks are 80 b) Its sales are 2000 and stocks are 100 c) Its sales are 800 and stocks are 40 d) Adequate information not available for calculation Q. When asset is created by a firm, it is: a) Sources of funds b) Use of funds c) Inflow of funds d) None of the above Q. Increase in long term uses during a year is 125% of the increase in long term sources: a) Improvement in debt equity ratio b) Increase in current ratio and net working capital c) Decline in current ratio and net working capital d) Deterioration in debt service coverage ratio. Q. Working capital means which of the flowing : a) The funds required by a firm for day to day business b) Amount of fixed assets and current assets c) Current assets-current liabilities d) Amount of current assets required to run the business Q. The borrowers are required to contribute some margin as a source of finance for current assets. This is called: a) Working capital b) Net working capital c) Working capital gap c) Permissible bank finance Q. Which of the following is not a source to finance working capital: a) Market credit or outstanding expenses b) Bank finance for working capital c) Net working capital d) Term loan

Q. The time period or the activity involved in purchasing of raw material, converting it into finished goods, selling the finished goods and recovering the debtor, is called: a) Working capital b) Working capital cycle c) Working capital activity d) Gross working capital Q. Which of the following methods are used in making assessment of working capital and sanctioning working capital limits by the bank (a) holding norms based method of Tandon Committee called MPBF method (b) projected turnover method of Nayak Committee (c) Cash Budget Method : a) a and b only b) a and c only c) b and c only d) a to c all Q. As per 1st method of lending of MPBF method, what is the amount of net working capital to be contributed by the borrower: a) 25% of working capital b) 25% of current assets c) 25% of working capital gap d) 155 of current assets Q. As per 2nd method of lending of MPBF method , what is the amount of net working capital to be contributed by the borrower: a) 25% of working capital b) 25% of current assets c) 25% of working capital gap d) 155 of current assets Q. The 2nd method of lending of MPBF method is used where the amount of –––––– is––––––: a) Working capital, above Rs. 5 cr b) Working capital , up to Rs. 5 cr c) Fund based working capital limit, up to Rs. 5 cr d) Fund based working capital limit, above Rs. 5 cr Q. Which of the following statement is not true regarding forfeiting: a) It is done on with or without recourse basis b) It r provides working capital finance to the seller c) It is used in case of exports d) None of the above Q. For which of the following activities/industries, the cash budget method is used (a) seasonal industries (b) service industries (c) Construction activity9D) film production (e) software development. a) a and c all b) a to d all c) a to d all d) a to e all Q. In case of cash budget method, the bank finance is sanctioned on the basis of : a) Monthly cash receipts b) Monthly cash payments c) Highest cash deficit d) Lowest cash deficit Q. Under projected turnover method of Nayak Committee, the working capital is –––––––: 24

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) a) Min 25% of the projected turnover b) Min 20% of the projected turnover c) 15% of the projected turnover d) 5% of the projected turnover Q. Under projected turnover method of Nayak Committee, the working capital limit is ––––––– a) Min 25% of the projected turnover b) Min 20% of the projected turnover c) 15% of the projected turnover d) 5% of the projected turnover Q. Under projected turnover method of Nayak Committee, the working capital margin of borrower is––– a) Min 25% of the projected turnover b) Min 20% of the projected turnover c) 15% of the projected turnover d) 5% of the projected turnover Q. If a trade bill of exchange is purchased by the from a borrower, the purchased bill be shown in the books of the borrower as –––––: a) Debit to account of the buyer b) Debit to account of the buyer c) Debit to the bills receivable account d) It will not be shown in the books Q. Which of the following is not matched: a) Demanded bills are purchased by banks b) Usance bills are discounted by banks c) Under LC, the demand or usance bills are negotiated d) None of the above Q. In order to address the problem of delay in realization of bills, as per RBI guidelines, the banks may take advantage of improved computer network like: a) RTGS b) NEFT c) SFMS d) All the above Q. What type of facilities out of the following can be allowed to non- constituents (person not regularly dealing with a bank) by banks: a) Fund based loans like overdrafts b) Letter of credit c) Bank guarantee d) None of the above Q. Banks cannot discount bills drawn as without recourse or cannot issue LCs with a without recourse facility, because: a) This creates a situation of non-recovery of bank loan b) This deprives the bank, the right to proceed against the drawer c) This gives rise to fraudulent situations d) All the above Q. What type of without recourse bills of exchange can be discounted by banks: a) All bills which are genuine bills b) Where the bill has been co-accepted by another bank c) Bills drawn letter of credit

d) No such bill can be purchased or discounted. Q. If the bank provides guarantee to meet the financial obligations of the applicant customer, in case of happening of some event , such guarantee is called; a) Deferred payment guarantee b) Performance guarantee c) Financial guarantee d) Continuing guarantee Q. Which of the following does not fall in the category of financial guarantee: a) Guarantee issued in lieu of security deposit b) Guarantee issued for earnest money deposit c) Guarantee issued in a court case d) None of the above Q. Bank guarantees should normally not be issued with maturity longer than ––––––––: a) 1 years b) 3 years c) 5 years d) 10 years Q. When banks issue bank guarantees on behalf of stock exchange brokers or commodity exchange brokers, the margin should be: a) Min 25% b) Min 30% c) Min 50% d) At discretion of banks Q. Transactions under letter of credit are regulated by which of the following: a) FEDAI Rules b) UCPDC 600 c) INCOTERMS d) All the above Q. Which of the following are the issues which need attention of a Finance Manager? a) The optimum level of Current Assets b) The pattern of Financing Current Assets c) a) and b) both d) None of the above Q. Which of the following are the characteristics of Current Assets? a) A short life span non exceeding 12 months b) Any one form of Current Assets gets transformed into other form of Current Assets c) Both a) and b) above d) None of the above Q. Which of the following are current Assets? a) Cash b) Accounts Receivables c) Inventory d) All these Q. Which of the following is CORRECT statement regarding current Assets? a) A higher investment in Current Assets increases the liquidity position b) It brings down profitability due to higher blockage of funds c) The optimum level of Current Assets is decided considering tradeoff between the cost of liquidity and cost of liquidity d) All the above 25

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) Q. The level of investment in Current Assets depends on; a) Length of operating cycle b) Seasonality of operations c) Expansionary market conditions d) All these liquidity approach d) All the above Q. The Aggressive approach of working capital finance involves; a) Maximum reliance on short term source of financing b) Even a part of permanent working capital is financial through short term sources c) This is highly profitable and low liquidity d) All the above Q. Which of the following method is correct for estimating duration of operating cycle? a) Raw Material = Average Raw Material Inventory divided by Raw Material Consumed/ 360 b) Work in Process = WIP Inventory divided by Cost of Production/ 360 c) Finished Goods = Finished Goods Inventory divided by Cost of Goods Sold/ 360 d) All the above Q. Which of the following is CORRECT regarding duration? a) Accounts Receivable = Average Debtors divided by Credit Sales/ 360 b) Accounts Payable = Average Creditors divided by Credit Purchases/ 360 c) Both a) and b) d) None of the above Q. Which of the following is CORRECT regarding working capital requirement? a) Sales per day x Weighted operating cycle + Cash required b) Sum of duration of Raw Material WIP and Accounts receivable c) Weighted Average of Receivables d) All the above Q. MPBF means; a) Maximum Permissible Bank Finance b) Minimum Permissible Bank Finance c) Moderate Possible Bank Finance d) Monetary Prime Bank Finance Q. CC limit for working finance is; a) Clean Credit b) Cash Credit c) Credit Cheque d) Clean Chit Q. The credit limits can be classified as; a) Regular limit b) Short term limit c) Adhoc limit d) All these Q. The securities for working capital limit can be; a) Inventory b) Back debts c) a) + b) both d) None of the above

Q. Which of the following are considered for arriving at tangible net worth? a) Capital, Reserves and Surplus b) Minus Intangible Assets and Accumulated losses from the above c) = Tangible Net Worth d) All the above Q. Which of the following financial ratios are considered for sanctioning of Working Capital Finance? a) Current Ratio b) Debt-Equity Ratio c) PBDIT to Net Sales d) All these Q. Which of the following ratio is not considered for sanction of working capital limit? a) Debt-Service Coverage Ratio b) Debtors Velocity c) Creditors Velocity d) Inventory Turnover Q. Which of the following is Leverage Ratio? a) Debt-Equity Ratio b) TOL-TNW c) Total debt/ PBDIT d) All these Q. Which of the following are methods for assessment of working capital? a) Turnover Method b) MPBF System c) Cash Budget System d) All these Q. Which of the following are fund based limits? a) Cash credit b) Overdraft against Book debts c) Packing Credit d) All the above Q. Which of the following is considered for computation of Letter of Credit limit for working capital? a) Average Usance Period b) Average Lead Time c) a) and b) above d) None of above Q. The cost of sale comprises of; a) Raw Material Labour and Factor overheads b) Depreciation c) Adjustment for WIP d) All the above Q. How do you arrived at operating profit? a) Gross Profit b) Subtract Selling, General and Administration expenses c) Subtract Interest d) a- b + c) Q. Which of the following is NOT a current liability? a) Provision for Tax and Divided b) Interest payable c) Deposits maturing in 2 years d) Creditors for goods Q. Which of the following is a Term liability? a) Term loan from Financial Institutional b) Term deposits c) Deferred payment credit d) All the above Q. Which of the following are non-Current Assets? a) Deferred Receivables b) Goodwill c) P and L A/c loss) d) All these 26

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) Q. Which of the following is part of Inventory? a) Raw Materials b) Work in Progress c) Finished Goods d) All these Q. Which of the following is not a Current Assets? a) Investment in other companies b) Advance payment of tax c) Advances to suppliers d) Cash and Bank Balance Q. The computation of MPBF will be; a) Calculate working capital gap CA—CL) b) 25% of Current Assets excluding export receivable has to be subtracted c) a—b of the above is MPBF d) All the above Q. The sources of working capital requirement are; a) Own sources Net Working Capital) b) Suppliers Credit c) Other Current Liabilities d) All the above Q. Under various methods of working capital assessment, a firm is required to bring; a) Under first method – 25 percent of working capital gap b) Under second method – 25 percent of total Current Assets c) Under third method – 100 percent of core Current Assets and 25 percent of other Current Assets d) All the above Q. Under the Cash Budget method the Bank Finance requirement will be; a) Cash inflow – Cash outflows = Cash deficit to be financed by the Bank) b) Equal to cash outflows c) Equal to cash inflows d) None of the above Q. The RBI guidelines for considering working capital up to Rs.5 crore stipulate? a) WC can be sanctioned up to 20 percent of projected annual turnover b) WC requirement is assessed 25 percent of projected turnover where 5 percent is contributed by the owner c) Both a) and b) d) None of the above Q. Which of the following is CORRECT regarding efficient inventory management? a) It reduces the NWC available with the firm b) It result in reduction in inventory c) The WC requirement is reduced d) It also increases turnover ratio Q. Which of the following is liquidity ratio? a) Quick Ratio b) DSCR c) TOL—TNW d) DER Q. Which of the following is NOT CORRECT regarding Current Ratio?

a) The Current Ratio can be negative b) If the level of Current Assets remains the same, increase in NWC results in increased Current Ratio c) The Current Ratio can be less than one d) It indicates liquidity Q. What is commercial paper? a) An unsecured promissory note b) Issued by a corporate with good Credit Rating c) The issuing company need to have a minimum net worth of Rs.3 crore d) All the above Q. The features of commercial paper are; a) It is a negotiable instrument b) Issued at discount and paid at face value c) It can be traded d) All the above Q. The conditions for issuing a commercial paper are; a) The issuing company should be enjoying credit limit with a Bank b) The credit limit should be classified as Standard Asset. c) The total credit limit and amount of commercial paper should not exceed MPBF d) All the above Q. Which of the following is NOT a feature of commercial paper? a) It can be traded in money market b) It can be issued from a Bank c) It is a short-term instrument issued for less than one year d) It can be counter guaranteed by a Bank Q. The commercial paper can be issued by; a) an individual b) a corporate c) a partnership d) All of these Q. What is for faiting? a) It is a sale of Future Receivables to a forfaitor b) It can be for long term c) The beneficiary receives the payment in advance d) All the above Q. The mechanism of fortailing are; a) The future Receivables along with pronote or Bill of Exchange are transferred by the Exporter in Favour of Fortaitor b) The Fortaitor provides 100 percent finance to the Exporter c) The Risk of default in payment lies with the Forfaitor d) All the above Q. Which of the following is NOT CORRECT regarding forfeiting? a) There are 3 parties involved in the transaction of forfeiting b) It is with recourse to the Drawer of the Bill c) The exchange Risk lies with the financier d) It is used primarily for deferred payments Q. Which of the following is CORRECT regarding letter of credit? 27

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) a) It is issued by the importer’s Bank on behalf of the importer b) It does not carry Risk to opening Bank c) It can also be opened by Seller’s Bank d) All the above Q. Under the turnover method of working capital finance assessment, the maximum limit can be sanctioned as percent of projected turnover is; a) 25 b) 20 c) 50 d) 40 Q. The Cash Budget method of working capital finance is more suitable to the firm with; a) Seasonal operations b) High level of operations c) Low level of operations d) all the above Q. To financial analysis, “working capital” means the same things as; a) Total Assets b) Fixed Assets c) Current Assets d) Current assets minus current liabilities Q. Which of the following would be consistent with an aggressive approach to financing working capital? a) Financing short-term needs with short-term funds b) Financing permanent inventor build up with longterm debt c) Financing seasonal needs with short-term funds d) Financing some long-term needs with short-term funds Q. Which of the following would be consistent with a conservative approach to financing working capital? a) Financing short-term needs with short-term funds b) Financing short-term needs with long-term debt c) Financing seasonal needs with short-term funds d) Financing some long-term needs with shortterm funds Q. Which of the following would be consistent with a hedging maturity matching) approach to financing working capital? a) Financing short-term needs with short-term funds b) Financing short-term needs with long-term debt c) Financing seasonal needs with short-term funds d) Financing some long-term needs with shortterm funds Q. Which of the following is a basic principle of finance as it relates to the management of working capital? a) Profitability varies inversely with risk b) Liquidity moves together with risk c) Profitability moves together with risk d) Profitability moves together with liquidity Q. Which of the following illustrates the use of a hedging approach to financing assets? a) Temporary current assets financed with long-term liabilities

b) permanent working capital financed with long-term liabilities c) Short term assets financed with equity d) All assets financed with a mixture of 50% equity and 50% long term debt Q. In deciding the optimal level of current assets for the firm, management is confronted with ---a) a trade- off between profitability and risk b) a trade-off between liquidity and risk c) a trade-off between equity and debt d) a trade-off between short-term versus long-term borrowing Q. Which of the following statements is MOST CORRECT? a) For small companies, long-term debt is the principal source of external financing b) Current assets of the typical manufacturing firm account for over half of its total assets c) Strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities d) Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months Q. The amount of current assets required to meet a firm’s long-term minimum needs is referred to as -------- working capital a) permanent b) temporary c) net d) gross Q. The amount of current assets that various with seasonal requirements is referred to as -----working capital; a) permanent b) net c) temporary d) gross Q. Having defined working capital as current assets, it can be further classified according to ------a) financing method and time b) rate of return and financing method c) time and rate of return d) components and time Q. Your firm has a philosophy that is analogous to the heading maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment? a) Trade credit b) 6-month bank notes c) Accounts payable d) Common stock equity Q. Your firm has a philosophy that is analogous to the hedging maturity matching) approach. Which of the following is the most appropriate Nonspontaneous form for financing the excess seasonal current asset needs? a) Trade credit b) 6-month bank notes c) Accounts payable d) Common stock equity 28

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) Q. Under a conservative financing policy a firm would use long-term financing to finance some of the temporary Current Assets. What should the firm do when a “dip” in temporary Current Assets causes total assets to fall below the total long-term financing? a) Use the excess funds to pay down long-termdebt b) Invest the excess long-term financing in marketable securities c) Use the excess funds to repurchase common stock d) Purchase additional plant and equipment Q. Which of the following statements is CORRECT for a conservative financing policy for a firm relative to a former aggressive policy? a) The firm uses long-term financing to finance all fixed and current assets b) The firm will see an increase in its expected profits c) The firm will see and increase in its risk profile d) The firm will increase its dividends per share DPS) this period Q. Which of the following statements is CORRECT for a aggressive financing policy for a firm relative to a former conservative policy? a) The firm will uses long-term financing to finance all fixed and current assets b) The firm will see an increase in its expected profits c) The firm will see a decline in its risk profile d) The firm will need to issue additional common stock this period to finance the Assets Q. How can a firm provides a margin of safety if it cannot be borrow on short notice to meet its needs? a) Maintain a low level of Current Assets especially cash and marketable securities) b) Shorten the maturity schedule of financing c) Increasing the level of Fixed Assets especially plant and equipment) d) Lengthening the maturity schedule of financing Q. Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to ----------a) meet its cash obligations as they occur and take advantage of prompt payment discounts b) support the proper level of sales and take prompt payment discounts c) maintain current and acid-test ratios at or above industry norms d) meet its cash obligations as they occur and support the proper level of sales Q. If a company moves from a “conservative” working capital policy to an “aggressive” policy, it should expect ------------.: a) liquidity to decrease, whereas expected profitability would increase b) expected profitability to increase, whereas risk would decrease

c) liquidity would increase, whereas risk would also increase d) risk and profitability to decrease Q. To financial analysis, “net working capital” means the same thing as --------------. a) Total Assets b) Fixed Assets c) Current Assets d) Current Assets minus Current Liabilities Q. If Current Assets are 100 and Current Liabilities are 60. The contingencies requirement is 10% and cash requirement is 2, what is working capital requirement? a) 50 b) 46 c) 80 d) 30 Q. The lead time for raw material purchase is 20 days and the transit period 10 days. If the usance period of LC is fixed as 3 months. The LC will remain outstanding for: a) 4 months b) 3 months c) 3 months + 20 days d) 3 months Q. If consumption of raw material purchased under LC is Rs.12 cr in a year and minimum quantity to be purchased is Rs. 2 cr, the frequency of opening LC would be: a) Each month b) each 2 months c) Each 3 months d) according to requirement Q. If consumption of raw material to be purchased under LC is Rs.12 cr the minimum quantity to be purchased is Rs. 2 cr, the lead time 20 days, the transit period 10 days and credit period 3 months, calculate the amount of LC limit: a) Rs. 4 cr b) Rs. 2 cr c) Rs. 6 cr d) Rs. 12 cr Q. Commercial paper is issued by –––––– for financing ––––––––: a) Banks , loans b) Banks, investments c) Companies, current assets d) Companies, fixed assets Q. The minimum and maximum amount for which CP can be issued is: a) Min Rs. 1 lac, max Rs. 1 cr b) Min RS. 5 lac, max Rs. 1 cr c) Min Rs. 1 lac, no maximum d) Min Rs. 5 lac, no maximum Q. UCPDC rules are framed by: a) FEDAI b) ICC Pairs c) RBI d) Bank for international Settlement, Basel Q. Which of the following functions are performed by a factor: a) Financing the receivables b) Management of receivables c) Administration sales ledgers d) All the above Q. If the debtor defaults and the factor is unable to recover the amount of receivable from seller also, this is called: 29

IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644

INSTITUTE OF BANKING STUDIES (IBS) a) Forfaiting b) With recourse factoring c) Without recourse factoring. d) Bills financing Q. Term loans are sanctioned to finance which type of assets: a) land, building ,stocks vehicles b) land, building , vehicles, debtors c) land, building , vehicles, stocks and debtors d) land, building ,vehicles Q. Which of the following ratio is important ratio for the purpose of sanctioning term loans: a) Debt service coverage ratio b) Debt equity ratio c) Debt service coverage ratio and current ratio a) d) Debt service coverage ratio and debt equity ratio Q. Which of the following features of term loans are correct: a) There is a uniform repayment schedule for term loans b) the moratorium period of a term lain is same in all cases c) repayment of TL can be in the form of EMI only d) None of the above Q. When bank provide bank guarantee in favor of machinery supplier, who is ready to supply machinery on a long term credit, to the customer of the bank, such guarantee is called: a) Performance guarantee b) Standby guarantee c) Deferred payment guarantee d) Continuing guarantee Q. Which of the following statement is not correct? a) Objective of DPG and TL is same i.e. financing the fixed assets b) Obligation under term loan and DPG is paid by the customer from future profit. c) DPG and TL are fund based credit limits d) DSCR ratio is important for both the TL and DPG Q. Project appraisal can be taken up in the following forms (a) managerial appraisal (b) technical appraisal (c) Economic appraisal (d) social appraisal a) a to d all b) a,b and c c) b,c and d a,c and d Q. Which of the following aspect is not taken into technical appraisal: a) Reputation of the promoters b) Production process finalized by the management c) Availability of raw material and other inputs d) Availability of infrastructure Q. Which of the following is not used under return on investment:

a) net present value method b) Internal rate of return method c) Pay –back period method d) Break-even analysis Q. Which of the following is a feature of an infrastructure project (a) long implementation period (b) long gestation and payment period (c) high debt equity ratio (d) low profitability : a) a to d all b) a to c only c) b to d only d) a and b only Q. For meeting financial requirements of infrastructure projects, the banks can grant which type of credit facilities: a) Term loans, project loans only b) Project loans, subscription to bonds and debentures or equity/ preference shares only c) Term loans, project loans , subscription to bonds and debentures or equity / preference shares only d) Working capital fiancé, term loans, project loans, subscriptions to bonds and debentures or equity / preference shares. Q. In infrastructure project financing, the banks can participate in take –out financing arrangement with: a) Reserve Bank b) Exim Bank c) IDFC/ Other financial institutions d) Any of the above Q. Commercial banks can issue bank guarantees in favor of other institutions financing infrastructure projects, provided the bank giving guarantee take a funded share in the project at least the extent of –––––% a) 5% b) 10% c) 15% d) 20% Q. Long term financing of infrastructure projects can create which of the following type of risk for the bank: a) Settlement risk b) Operational risk c) Liquidity risk d) systemic risk Q. Deferred payment guarantees are issued by banks on behalf of their customers: a) In lieu of long term security deposits b) for purchase of raw material and other such assets c) For acquiring capital assets d) For all the above purposes Q. Which of the following is a source of financing cost of fixed assets by a firm (a) internal accrual of the firm (b) credit available from suppliers (c) debentures (d) deferred payment guarantees a) a to d all b) a to c only c) a,c and d only d) b and d only Q. Which of the following rations provides information regarding repayment capacity of the borrower for a term loan: a) quick ratio b) Debt equity ratio c) Debt service coverage ratio d) Return on capital employed 30

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INSTITUTE OF BANKING STUDIES (IBS) Q. What is Loan Review Mechanism? a) A system of control and monitoring the loan accounts b) To avoid risk of default. c) A process which facilitates quality of Asset for a Bank d) All the above Q. The objectives of Loan Review Mechanism are : a) To ensure proper utilization of loan funds by a customer b) To ascertain that Business is run on satisfactory lines c) To initiate proper action / remedial measures in, case of adverse features in the account d) All the above Q. How would you observe the adverse features of an account? a) Frequent over drawings in the account b) Return of cheques / bills unpaid c) Low turn over d) All the above Q. The action to be initiated by a Bank in case of adverse features in the account involve: a) Regular check up and inspection b) Deciding drawing limit according to availability of stock c) To prevent, diversion of funds d) All the above Q. How would you evaluate stock statement submitted by a customer? a) Analyse non – moving stocks b) Identifying receivables which are more than 6 months old c) Physical verification of the stock d) All the above Q. The annual Financial Statements are useful to analyse: a) Use / diversion of funds b) Financial status of the company c) Realisation of debt d) All the above Q. How financial Statements are helpful in working Capital Finance? a) For renewal of credit limit b) To ascertain MPBF c) (a) and (b) both d) None of these Q. Which of the following is CORRECT regarding monitoring of loan? a) Bank can appoint a nominee. Director in case of large limit. b) Conducting interface with select creditors and debtors c) Conducting credit audit d) All the above Q. Which of the following are objectives of credit audit?

a) Ensuring quality of asset b) Ensuring regulatory compliance c) Identifying early warning signals d) All the above Q. Which of the following is NOT the objective of credit audit? a) Review of risk assessment b) Assessment of credit limit c) Recommend corrective actions d) To recommend needed skills among the staff Q. The functions of credit audit department are : a) To analyse credit audit findings b) to appraise management c) to follow up with controlling authorities d) All the above Q. Which of the following is NOT an objective of credit monitoring? a) To comply with RBI guidelines b) Proper utilisation of loan funds c) To ensure that securities for loans are in fact d) The operations of business are satisfactory Q. Which of the following is NOT objective in credit monitoring? a) Assessing conduct of borrowers account b) Sending regular reminders to borrowers c) Periodical inspection d) Analysing financial statements Q. Which of the following will NOT help in ascertaining irregularities in the stock position? a) Financial statements analysis b) Stock audit c) Physical inspection of stock d) Cross check from Balance Sheet Q. The following provides early signals of warning in the account: a) Return of cheques / bills unpaid b) Devolvement of LC c) Demand for higher limit d) Delay in submission of stock statement Q. Which of the following is NOT purpose of credit audit? a) Inspection of stock b) Ensuring quality of credit portfolio c) Compliance of terms and conditions d) Feedback to top management Q. Which of the following is the purpose of appointing a nominee Director? a) To be a part of management b) To keep a track on important decisions in the Board meetings c) To guide the company d) To ensure proper safety of securities Q. The frequency of Review is : a) High Risk Accounts – 3 Months b) Average Risk – 6 Months c) Low Risk Accounts – 1 year d) All these 31

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INSTITUTE OF BANKING STUDIES (IBS) Q. The review points for audit action are: a) scrutiny of documentation b) assessment of credit risk c) examining conduct of account d) All the above Q. What is Corporate Debt Restructure (CDR) mechanism? a) A process of restructuring the corporate debt b) To minimize losses to the creditors and other stakeholders. c) It is the process outside legal mechanism d) All the above Q. CDR mechanism is for: a) Corporates enjoying credit facilities from more than one Bank or Financial Institution. b) They are the large Borrowers c) (a) and (b) both d) None of the above Q. The conditions for CDR Borrowers are: a) The Borrowings are under syndicated/consortium system. b) Total outstanding liability of more than Rs. 10 crore c) It has 3 tier structure d) All the above Q. What is CDR standing forum? a) It is a self empowered body. b) It represents general body of all Banks and Financial Institutions c) It laid down policies and guidelines for CDR mechanism d) All the above Q. Who of the following is NOT a member of CDR? a) Chairman and Managing Director of all Banks b) Chairman and Managing Director of IDBI Bank c) Representative of RBI d) Managing Director and CEO of ICICI Bank Q. The features of CDR standing forum are: a) It meets once in 6 months b) The chairman is appointed for one year c) It will laid down all the norms for restructure of a corporate d) All the above Q. What objective is achieved by documentation, in case of a loan granted by the bank: a) To establish liability of the borrower in the court, in case of need b) To establish liability of the guarantor, if any in the court, in case of need c) To create proper charge on securities d) All the a above Q. Which of the following is an important precaution which is required to be taken in documentation (a) payment of appropriate stamp duty (b) date of execution should not be earlier to date of payment of stamp duty (c) parties signing the documents have proper authority (d) if document is required to be registered, it should be got registered.

a) a to d all b) a,b and c only c) a,c and d only d) b and c only Q. Which of the following can give guarantee on behalf of a borrower? a) An individual person b) A partnership firm c) A company d) All the above Q. Personal guarantee of the promoter directors can be taken by banks (which one not fully correct): a) Where the company is a closely held company b)In the formative stage of the company for ensuring continuity of management of the company c) In all cases, irrespective of reasons, as it is compulsory d) None of the above Q. Which of the following charge is possible to be created on a security for bank loan, depending up on nature of the security (a) mortgage (b) right of set off (c) hypothecation (d) pledge (e) assignment? a) a to e all b) a,b, c and d only c) a,b and d only d) a,c, d, e only Q. In case of pledge, when the borrower keeps the stocks on behalf of the bank, as bank’s agent, this is called: a) Actual possession b) Symbolic possession c) Constrictive possession d) Possession cannot be given to borrower in case of pledge Q. Which of the following is not correct: a) In hypothecation, the possession is with the borrower b) In hypothecation, the ownership is with the bank c) In mortgage, normally the possession is with the borrower d) In pledge, the possession is with the bank b) Q. For allowing drawings in a cash credit account, banks calculate drawing power on the basis of: a) Value of stocks b) Value of book debts c) Amount of trade creditors d) All the above Q. The value of stocks is Rs. 10 lac and that of trade debtors Rs. 5 lac and trade creditors Rs. 2 lac. Bank has sanctioned cash credit limit of Rs. 10 lac at 20% margin for stocks and 30% margin for trade debtors. What is the maximum amount, the borrower can draw? a) Rs. 10 lac b) Rs. 9.90 lac c) Rs. 9.00 lac d) Rs. 8.50 lac Q. The sanctioned limit for pre-shipment loan is Rs.10 lac and margin is 20%. To avail the limit fully, the value of stocks should be: a) Rs. 10 lac b) Rs. 12 lac c) Rs. 12.5 lac d) Rs. 15 lac Q. When liquidity position is tight in the market, the 32

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INSTITUTE OF BANKING STUDIES (IBS) a) a to d all b) a,b and c only c) a,c and d only d) b and c only Q. Which of the following can give guarantee on behalf of a borrower? a) An individual person b) A partnership firm c) A company d) All the above Q. Personal guarantee of the promoter directors can be taken by banks (which one not fully correct): a) Where the company is a closely held company b)In the formative stage of the company for ensuring continuity of management of the company c) In all cases, irrespective of reasons, as it is compulsory d) None of the above Q. Which of the following charge is possible to be created on a security for bank loan, depending up on nature of the security (a) mortgage (b) right of set off (c) hypothecation (d) pledge (e) assignment? a) a to e all b) a,b, c and d only c) a,b and d only d) a,c, d, e only Q. In case of pledge, when the borrower keeps the stocks on behalf of the bank, as bank’s agent, this is called: a) Actual possession b) Symbolic possession c) Constrictive possession d) Possession cannot be given to borrower in case of pledge Q. Which of the following is not correct: a) In hypothecation, the possession is with the borrower b) In hypothecation, the ownership is with the bank c) In mortgage, normally the possession is with the borrower d) In pledge, the possession is with the bank Q. For allowing drawings in a cash credit account, banks calculate drawing power on the basis of: a) Value of stocks b) Value of book debts c) Amount of trade creditors d) All the above Q. The value of stocks is Rs. 10 lac and that of trade debtors Rs. 5 lac and trade creditors Rs. 2 lac. Bank has sanctioned cash credit limit of Rs. 10 lac at 20% margin for stocks and 30% margin for trade debtors. What is the maximum amount, the borrower can draw? a) Rs. 10 lac b) Rs. 9.90 lac c) Rs. 9.00 lac d) Rs. 8.50 lac Q. The sanctioned limit for pre-shipment loan is Rs.10 lac and margin is 20%. To avail the limit fully, the value of stocks should be: a) Rs. 10 lac b) Rs. 12 lac c) Rs. 12.5 lac d) Rs. 15 lac

large borrowers avail the sanctioned cash credit limit fully. But when the market liquidity position is comfortable, they avail market borrowings as a substitute for cash credit limit that creates funds management problem for the bank. To take of this problem which of the following system has been implemented in banks: a) Consortium lending b) Exposure ceiling c) Loan system of credit delivery d) All the above Q. Loans system of credit delivery is required to be used by banks where: a) fund and non-fund based working capital limits are Rs. 10 cr and above b) fund and based working capital limits are Rs. 10 cr and above c) fund working capital limits (MPBF) are Rs. 10 cr and above d) non-fund based working capital limits are Rs. 10 cr and above Q. Under Loan system of credit delivery, the fluctuating portion called cash credit component should normally be: a) 80% of the MPBF b) 75% of the MPBF c) 50% of the MPBF d) 20% of the MPBF Q. The loan system credit delivery is not applicable in case of: a) activities cyclical and seasonal in nature b) activities carrying higher risk weight c) activities carrying lower risk weight d) activities which are of regular nature Q. The CDR norms may include; a) Restructuring package b) Maximum time period for validity c) Minimum level of promoter’s sacrifice d) All the above Q. Which of the following is CORRECT regarding Core Group? a) It assists the standing forum b) The Group will laid down norms which will be followed by CDR Empowered Group. c) Both (a) and (b) d) None of the above Q. What is CDR Empowered Group? a) It will have preliminary investigation of restructuring reports submitted by CDR cell b) It will decide potential viability of the project c) It will also decide the package to be offered for restructuring d) All the above Q. Which of the following factors CDR Empowered Group will look into while deciding the viability of the restructure? a) Return on capital employed b) Debt Service Coverage Ratio c) Gap between IRR and cost of fund d) All the above 33

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INSTITUTE OF BANKING STUDIES (IBS) Q. The eligibility criteria for CDR System involves: a) The account should be classified as Standard or Sub-standard Asset b) The company need not be sick c) Potential viable cases of NPA will get priority d) All the above Q. Which of the cases are NOT eligible for consideration under CDR System? a) Corporate involved in frauds b) Cases referred to BIFR c) Both (a) and (b) d) None of the above Q. Who can refer the cases to CDR? a) A creditor who has a minimum of 20 percent share in working capital or term loan. b) The concerned corporate with the support of the bank c) Where financial exposure is more than Rs. 100 crore, a Bank may decide whether to go for CDR or proceed under legal system d) All the above Q. The features of SME Debt Restructuring mechanism are : a) A SME with consortium finance will be eligible under this scheme b) The funding and non-funding liability should not exceed Rs. 10 crore. c) The concerned Banks may formulate the re structure package d) All the above Q. The features of SME Debt Restructuring mechanism are : a) The Bank with maximum outstanding can work out the restructure package b) The package should be implemented within 90 days c) Banks have to formulate the package with the approval of Board of Directors. d) All the above Q. The RBI guidelines for revival of Sick Units involve: a) Interest on working capital should be 1.5 percent below the Base Rate. b) Interest Free Funded Interest Term Loan c) A concession in interest up to 2 Percent on Term Loans. d) All the above Q. What is Credit Information Bureau India Ltd. (CIBIL)? a) It was set up to share information about defaults. b) This is an approved credit information company c) Majority of Banks are its members d) All the above Q. Which of the following is CORRECT regarding CIBIL? a) It was set up in January 2001 by State Bank of India and HDFC Bank b) Dun and Bradstreet Information Service is also its equity holder.

c) Only the members can have access to information d) All the above Q. The essential features of CIBIL are : a) All Banks/ FIS to submit details of suit filed accounts of willful defaulters of Rs.25 lac and above every quarter b) Such information is available on the website of CIBIL c) Even Housing Finance companies and Credit Card companies can avail the information d) All the above Q. Which of the following is TRUE regarding CDR? a) Credit default includes interest or principal and both b) The NPAs are classified into 3 categories such as sub-standard doubtful and loss Assets c) The default in payment could be intentional or due to any other reasons d) All the above Q. Which of the following is FALSE regarding CDR? a) In case of LC credit default means crystallization of liability. b) No provision should be made for standard Assets c) Writing off a loan means Borrower need not to pay the amount to the Bank d) All of the above Q. Which of the following is CORRECT? a) A claim of more than Rs. 10 lac can be filed under DRT b) Lok Adalat can settle claims up to Rs. 20 lac c) CIBIL was set up for sharing information about default Borrowers d) All the above Q. The Rehabilitation program aims for : a) to comply RBI guidelines b) to make the operations viable c) to increase the production d) to safeguard employees interest Q. Bank prefers a compromise with the Borrower for default loan due to: a) The security available may be insufficient b) It is not possible to recover the loan in an easy manner c) Legal process for recovery takes longer time d) All the above Q. The purpose of term loan is: a) To acquire Fixed Assets b) Term loan is also provided for working capital in exceptional cases c) Personal loans are also called term loans d) All the above Q. The features of Term loan are: a) It is repayable over a time period b) The repayment is mainly through EMI or periodical instalments 34

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INSTITUTE OF BANKING STUDIES (IBS) c) The Debt Service Coverage Ratio assumes a significant importance d) All the above Q. The Term loans can be classified as: a) Long Term b) Medium Term c) Short-term d) All these Q. The securities for a Term loan are: a) The Assets procured out of loan proceeds b) Collateral security as required by a Bank c) Both (a) and (b) d) None of the above Q. The charge over securities is by way of : a) Mortgage b) Hypothecation c) Pledge d) Any of these Q. In case of default in payment by the Borrower, the Term loan can be recovered by : a) Disposing the Security / Asset b) By Secure of Asset c) By taking over management of Asset d) All of the above Q. The Assessment of Term loan can be done by ; a) Techno – economic feasibility b) Managerial competencies c) Analysing financial ratios d) All the above Q. Incase if term loans the disbursement takes place as per progress of the Project. the borrowers are required to bring in margin as under: a) Entire amount up front b) Major portion of around 40-50% up front and the balance as per progress of the project c) Borrowers undertake to bring the margin as the project progresses d) Any of the above, as per mutual agreement between bank and borrower Q. In case of consortium lending, the lead bank normally performs the following functions (a) assessment of credit needs (b) documentation (c) creation and registration of charge over securities (d) monitoring of loan account (e) sanction of additional credit limits at its own level: a) a to e all b) a to d only c) a,c and e only d) b,c,d and e only Q. With a view to restrict the happening of frauds in consortium or multiple banking loans, RBI made it mandatory to obtain certification from –––––––– about compliance of various statutory prescriptions in vogue. a) Bank , CA, Company Secretary, Cost and Workers Accountant b) Company, Bank , CA, Company Secretary c) CA, Company Secretary, Cost and Works Accountant d) Company, bank,CA Q. Which of the following is not a true statement: a) Stamp duty on documents invariably differs from State to State

b) Date of signing of document s can be date subsequent to date of payment of stamp duty c) Documents cannot be filled once these are signed d) None of the above Q. Which of the following events in the conduct of account by a borrower can be taken as a disturbing signal: a) Non- payment or delayed payment of documents under LC b) Repeated request for enhancement of limits c) Frequent return of cheques from borrower’s account d) All the above Q. Credit control and monitoring is also called: a) Loan Follow –up system b) Loan Control Mechanism c) Loan Review Mechanism d) Credit risk management mechanism Q. Which of the following objectives is served by the credit control and monitoring system (a) to ensure that funds provided by the bank are put to intended use (b) to ascertain the that the business continues to run on the projected lines (c) in case of deterioration, to take rehabilitation or recovery action. a) a to c all b) a and b only c) b and c only d) c and d only Q. Which of the following is not a tool for credit monitoring : a) Conduct of account with the bank b) Periodical information that borrowers submit, as per conditions of the loan c) Financial statements submitted by the borrower d) None of the above Q. A bank can monitor the loan account, on the basis of which of the following? a) Stock reports submitted by the borrower b) Stock and receivable conducted by the bank c) Market report about the borrower d) All the above Q. Credit audit relates to which of the following area of banking a) To examine compliance with extant sanction b) To examine post- sanction process and procedure c) To examine various credit functions of the bank d) All the above Q. Which of the following is not an objective of credit audit (a) improving the quality of loan portfolio (b) review of credit risk assessment (c) to pick-up early warning signals and suggest remedy (d) to get report on regulatory compliances: a) a,c and d only b) b,c and d only c) a,b and c only d) a to d Q. Which of the following events, can be taken as unsatisfactory, in the conduct of loan account by a borrower: a) Repeated overdrawing by the borrower 35

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INSTITUTE OF BANKING STUDIES (IBS) b) Opening account with other bank and routing transactions through that account c) Delay in payment of interest of principal or both d) All the above Q. In certain cases, the banks nominate their officials as directors on the Board of financial companies with the objective of: a) Directing the company for better credit management b) Guiding the company to improve their worming c) Having information about important decisions of the Board of the company d) All the above Q. The important financial ratios for Term loan are: a) DSCR b) IRR / NPV c) Debt – Equity Ratio d) All these Q. The important consideration in technical appraisal of Term loan are: a) production process and technology b) availability of required infrastructure c) nature of technology d) All the above Q. Which of the following is not a factor for technical appraisal? a) Technology provider and its servicing arrangements b) Management competencies c) Raw materials availability d) Availability of skilled labour Q. The Basic consideration under economic appraisal is : a) Return on investments b) Break – even analysis c) Sensitivity analysis d) All these Q. The managerial competencies involve : a) promoter’s background b) financial stake of promoter c) the team managing core issues d) All the above Q. Financing of infrastructure projects includes : a) Finance to construction of bridges, roads, power projects, tele-communication etc. b) Railways and Airports c) Both (a) and (b) d) None of the above Q. The features of Financing Infrastructure Projects are : a) longer gestation and repayment period b) high debt equity ratio c) long implementation d) All the above Q. The types of financing infrastructure can be: a) Take over finance b) Inter – institutional finance c) Financing promoter’s equity d) All the above Q. What is take over finance? a) Bank enters into financing arrangement with financial institution

b) A start up finance to complete the project is given by Financial Institution c) This is overtaken by the Bank at a later stage d) All the above Q. The norms for Project Finance are: a) Bank finance should be restricted to 50% of the total requirement b) Tenor of Bank loan should not be more than 7 years c) The proposal should have approval of Board d) All of the above Q. The prudential requirements for Infrastructure Project Finance are : a) Risk weight for capital adequacy b) Effective Asset Liquidity management c) Prudential credit exposure limits d) All the above Q. What is Deferred Payment Guarantee (D P G)? a) When Bank provides a guarantee on behalf of Borrower for default in future payment of a loan is known DPG b) This is a non-fund based finance c) The risk arises to the Bank on default by the Borrower d) All the above Q. Which of the following purposes Deferred Payment Guarantee is issued by a Bank? a) Purchase of capital goods b) Sale of goods c) To acquire additional inventory d) All these Q. Which of the following cannot be categorized as infrastructure project? a) Development of a port b) Equipment for manufacturing c) Highway projects d) Construction of flyovers Q. Which of the following is NOT CORRECT regarding infrastructure project? a) It has a long gestation period b) It has no risk for lender c) Debt – equity ratio is high d) It has a long implementation period Q. Which of the following is NOT a source of finance for Fixed Asset? a) DPG b) Suppliers Credit c) Debentures d) Term loan by Financial Institution Q. Which of the following ratio indicates debt repayment capacity of a Borrower? a) Debt Service Coverage Ratio b) Quick Ratio c) Liquidity Ratio e) Debt – Equity Ratio Q. Which of the following statements is TRUE regarding Term loan? a) A proper asset liability management is important 36

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INSTITUTE OF BANKING STUDIES (IBS) b) Installments due within one year are treated as current liability c) Repayment of Term loan is by way of periodical installments. d) All the above Q. Which of the following is NOT CORRECT regarding infrastructure project Financing? a) RBI does not insist on Asset Liability mismatch b) Banks can fund promoters equity to a certain extent. c) Exposure norms can be relaxed by RBI d) IDFC provides liquidity support Q. The term risk means: a) Loss on account of uncertainty b) Possibility of loss on account of uncertainties c) Actual loss on account or uncertainty d) Any of the above Q. Deficiency in loan documentation, is an example of which type if risk: a) Credit risk b) Operational risk c) Market risk d) Credit risk and operational risk Q. When there is risk to the bank on account of movement of interest rates or exchange rates or price of securities, this is called: a) Credit risk b) Operational risk c) Market risk d) Market risk and operational risk Q. Which of the following is the internal factor for credit risk: a) Excessive lending to cyclical industry b) Deficiency in the loan policy of the bank c) Poor quality of pre-sanction appraisal or postsanction follow up d) All the above Q. Which of the following is not correct regarding credit derivate products: a) The lending bank is protection buyer b) Some other bank is protection seller c) Protection buyer makes payment of premium to protection seller for the protection d) The loan account is transferred to protection seller bank. Q. Which of the following is not a part of the macro level risk mitigation step: a) Frequent review of norms of lending b) Fixation internal limits for aggregated exposures c) Sanctioning of credit proposal by following high standard of appraisal d) Fixation of ceiling for industry exposures Q. What is the objective of credit rating, out of the following : a) To take decision about acceptance or rejection of a proposal b) To determine the rate of interest i.e. pricing of the loan c) To use rating for evaluation of total credit portfolio through classification based on allotted ratings

d) All the above Q. Which of the following group is not a credit rating agency group: a) CIBIL, CRISIL, ICRA, CARE b) SMERA, CIBIL, ICRA, CARE c) SMERA, CRISIL , CIBIL, CARE d) SMERA, CRISIL, ICRA, CARE Q. In the processing of credit rating , the scoring is done on the basis of certain important risk area such as (a) managerial aspects (b) performance of other industries (c) financial aspects(d) business risk (e) available securities a) a to e all b) a,b,c, d only c) a,c,d,e only d) b,c,d,e only Q. A bilateral contract in which the risk seller (i.e. the lending bank) pays a premium to th buyer for protection against credit default or any other specified event is called: a) Credit risk instrument b) Credit default swap c) Credit default option d) Credit linked note Q. Credit default events defined by Internal Swaps and Derivatives Association (ISDA) include (a) bankruptcy (b) failure to pay (c) restructuring of loan (d) obligation repudiation/ moratorium: a) a to d all b) a,b,c only c) b,c and d only d) a,c and d only Q. Which among the following is correct regarding credit linked notes as credit derivative instrument: a) Notes are purchased by general investors b) Money received by the risk buyer (as SPV) is invested in high quality securities d) The investors get fixed or variable returns on the note during its life time d) All the above Q. Basel 2 accord is based on 3 pillars. Which of these does not match: a) Pillar 1 – minimum capital standard b) Pillar 2 – supervisory review c) Pillar 3 – risk management d) None of the above Q. What type of system is the credit rating? a) A system of credit appraisal b) A mechanism to mitigate credit risk c) a process for migration of credit risk d) a process for measurement of credit risk Q. Basel 2 framework implementation in India for Indian banks with branches abroad started wef: a) 31.3.2007 b) 31.3.2008 c) 31.3.2009 d) 31.3.2010 Q. Basel 2 framework implementation in India for Indian banks not having branches abroad started wef: a) 31.3.2007 b) 31.3.2008 c) 31.3.2009 d) 31.3.2010 Q. For implementing internal rating based approach, the banks can approach RBI for permission: 37

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INSTITUTE OF BANKING STUDIES (IBS) a) Latest by 01, 2012 b) Not before April 01,2012 c) latest by April 01, 2011 d) Not before April 01, 2011 Q. For implanting internal rating based approach for credit risk, the likely date of RBI approval is: a) Mar 31 2011 b) Mar 31 2012 c) Mar 31 2013 d) Mar 31 2014 Q. Which of the following is not a risk, which does not find mention in Basel 2: a) Credit risk b) Default risk c) Market risk c) Operational risk Q. –––––– is an arrangement (instrument) under which the risk seller get risk protection by paying regular premium to the risk, buyer, that issued the instruments to eh underlying credit. a) Credit risk instrument b) Credit swap c) Credit default option d) Credit linked notes Q. Which of the following is not the main objective of credit risk management? a) To limit the risk within acceptable level b) Maximize the risk adjusted rate of return on credit portfolio c) Not to permit any account to become nonperforming advance d) All the above Q. Which of the following approach is not applicable to credit risk, as per Basel 2 recommendations: a) Standardized approach b) Basic indicator approach b) Foundation internal rating based approach d) Advance internal rating based approach Q. Which of the following is CORRECT regarding project finance? a) Technical feasibility analysis is necessary b) Contribution from the promoter is necessary c) Promoter should have strong background d) All the above Q. What is Risk? a) Probability of loss on account of certain unpredicted events. b) There are different kinds of risks c) (a) and (b) both d) None of the above Q. The operational risk happens due to: a) Internal deficiencies in the system b) Frauds c) Management inefficiencies d) All these Q. The credit Risk may occur on account of : a) default in payment by Borrower b) invocation of guarantee c) devolvement of letter of credit d) All these

Q. What is credit rating? a) It is an assessment of Risk with the issuer of securities b) This is done by a credit rating agency c) It is an indication about safety of funds of investors d) All the above Q. The credit rating helps in : a) pricing of securities b) interest rate determination c) evaluating credit portfolio d) All these Q. Which of the following are companies approved by SEBI for credit rating? a) ICRA b) CARE c) CRISIL d) All these Q. Which of the following is the credit rating agency exclusively to rate SMES? a) SMERA b) SSP c) DULPH d) All these Q. The Basic parameters for Risk assessment are: a) Financial aspects b) Business c) Managenal Risk d) All these Q. Basal – II Accord does not recognize the following as Risk: a) Default Risk b) Operational Risk c) Market Risk d) Credit Risk Q. Which of the following is NOT Credit Risk? a) Loss due to fraud b) Failure of a customer to meet payment commitment c) Inability of a customer to re-imburse the Bank for devolvement of letter of credit d) All the above 81. The external factors affecting the Risk consists of : a) Government policy b) Inefficient Recovery measures c) Faulty repayment structure d) All the above Q. Credit Rating is a system of: a) Mitigating risk b) Measuring risk c) Credit Appraisal d) All these Q. Internal rating signifies: a) to rate a project b) to rate risk for internal use c) to rate promoters d) None of the above Q. Bank usually obtains external credit rating from: a) Suppliers b) Rating agencies c) Banking consultants d) Own expertise team Q. What are the documents which attract the same stamp duty throughout the length and width of the country? 38

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INSTITUTE OF BANKING STUDIES (IBS) a) Mortgage Deed b) Demand Promissory Note c) Hypothecation Deed d) Deed of Guarantee Q. What is the maximum stamp duty on DPN? a) Ad Valorem b) 25 paise c) One rupee d) 40 paise Q. Stamp duty on DPN is paid by way of : a) Revenue stamp b) Non – Judicial stamp paper c) Cash deposit in treasury d) Any of above Q. Letter of continuity is obtained in running accounts, viz, overdraft or cash credit, in order to; a) ensure that the advance does not become time barred under the Limitation Act. b) provide continuous validity or life to DPN, subject to overall limitation of three years. c) enable the bank to consider the loan as secured loan d) All of the above Q. Letter of continuity is NOT obtained in case of : a) Demand Loan b) Cash Credit ( Hypothecation ) a/c c) Cash Credit ( Pledge ) a/c d) Overdraft a/c e) All of the above Q. The limitation period of a demand loan document is : a) three years from the date of DPN b) 27 months c) no limit d) five years Q. A loan or advance payable on demand against the security of immovable property by way of mortgage, the limitation period is : a) twelve years from the date of mortgage deed b) three years from the date of mortgage deed c) five years from the date of mortgage deed d) Twelve years from the date of DPN Q. For obtaining external credit rating of their borrowers, the banks; a) make use or their own staff under guidance of outside agencies b) Engage services of reputed rating agencies c) Take help of experts like chartered accountants d) any of the above Q. A term loan account becomes NPA when : a) It has become overdue for payment and not paid b) When installment or interest is not paid for 90 days c) When installment or interest or part thereof, remains overdue for more than 90 days d) When installment or interest or part thereof, remains due for more than 90 days

Q. A cash credit or overdraft account is classified as sub standard when: a) Interest is debited but not paid b) account is out of order for more than 90 days c) account is overdue for sanction for 90 days d) All the above Q. The cash credit account became out of order on Dec 26, 2008. The account shall become sub standard wef ––––––, if the position continues. a) Mar 25, 2009 b) Mar 26, 2009 c) Mar 31, 2009 being the last day of the month d) Mar 31, 2009 being the last day of the year Q. A sub standard asset is an account which has remained : a) Out of order for 90 days b) Out of order up or equal to 12 months c) NPA for less than or equal to 12 months d) NPA for a period up to 24 months Q. In the following situations regarding doubtful account, which one is not correct: a) DF1 is DF account for a period up to one year b) DF2 is DF account for above one year but up to 10 years c) DF3 is DF account for above 3 years but up to 10 years d) DF is an account in which the loss of security is 50% or more, since its last verification. Q. An account became, out of order as on Mar 30, 2006, its classification as on Mar 31, 2009 will be: a) Sub standard b) Doubtful up to one year (DF1) c) Doubtful above one year and up to 3 years (DF 2) Q. A doubtful loan account has been rescheduled by the bank on Dec. 22, 2007. Its first due date for repayment is June 30, 2008. The borrower stated repayment of the loan w.e.f. April 16, 2008 regularly. The account will be upgraded to standard category wef: a) June 30, 2009 b) Jun 30, 2008 c) Apr 16, 2008 d) Apr 16 , 2009 Q. ABC Limited are availing credit limits with4 banks. Accounts with Bank 1 are regular. With Bank 2 these are irregular since Jan 12, 2009, with Bank 3 are irregular since Oct 16, 2008 and with bank 4 these are irregular since Dec 26, 2007. Which of the following does not match: a) Accounts with all banks to be treated as NPA b) With Bank 1 and Bank 2,accounts are standard c) With Bank 3, accounts are sub standard d) With bank 4, accounts are doubtful up to one year category Q. In the balance sheet of the bank, the provisions made or Standard accounts is classified as: a) Deduction from gross advances in schedule 9 b) Separate reserve under Reserve in Schedule 2 c) Other liabilities under Schedule 5 d) As a foot note in the notes on accounts 39

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INSTITUTE OF BANKING STUDIES (IBS) Q. Cooperative Debt Restructuring (CDR) is an institutional mechanism created under: a) Provisions of RBI Act 1934 b) Provisions of Banking Regulation Act 1949 c) Provisions of SARFAESI act 2002 d) RBI guidelines Q. Under CDR, the restructuring takes place with the consent of : a) DRT b) BIFR c) Lok Adalt d) Mutual consent of banks and borrowers on the basis of debtor –credit agreement Q. Which of the following is not part of CDR set up? a) CDR Standing Forum b) CDR Empowered Group c) CDR Cell d) CDR judicial Unit Q. CDR Empowered group takes a decision on the proposal referred to it for restructuring. Which of the following is not correct: a) It can sanction the proposal within 90 days of date of reference b) In exceptional cases, the period can go up to 180 days c) EDs of concerned banks and that of SBI, IDIB Bank, ICICI bank are members of this group d) None of the above Q. While considering a proposal , the CDR Empowered Group takes into account the following (Which one is not true) : a) Return on capital employed and debt service coverage ratio b) Extent of sacrifice of the banks and institutions c) Viability in 5 years and repayment of restructured debt in 7 years d) gap between IRR and cost of capital Q. CDR cells makes the initial scrutiny of the proposal received under CDR, from banks and FIs and has to put up proposals to CDR Empowered group within: a) 7 days b) 10 days c) 15 days d) 30 days Q. Which of the following types of loans are not eligible under CDR mechanism: a) loans under single bank financing b) loans under consortium financing c) Fund and non-fund based exposure of Rs. 10 cr and above d) Loans under multiple banking exposure and syndication arrangement Q. Which of the following Committee recommended a separate Act, for Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act? a) Rangrajan Committee b) T.R. Andhyarjuna Committee c) Narasimham Committee d) Nayak Committee

Q. SARFAESI Act, 2002 was made effective on : a) 21.06.2002 b) 01.06.2002 c) 01.04.2002 d) 15.03.2002 Q. What are the main features of SARFAESI Act, 2002? a) To put a legal system for securitization b) Empowering banks and financial institutions to take possession of the mortgaged securities c) To sell the securities without intervention of court. d) All the above Q. What are the main issues with which SARFAESI Act, 2002 deals with? a) Securitization of Assets b) Setting up of an Asset Reconstruction Company d) All the above Q. The essential features of securitization are : a) Acquisition of Financial Assets by a Securitization or Reconstruction Company b) The Assets may be NPA or standard c) On sale the Assets goes out of the Books of the originator d) All the above Q. What are the main functions of Assets Reconstruction Company? a) Setting up of a company b) Acquiring Assets for Reconstruction c) Acquire Assets for Asset Reconstruction d) All the above Q. Which of the following is NOT a function of Asset Reconstruction Company? a) To acquire pending recovery cases from DRT b) Act as an Agent for Recovery c) Act as Manager d) Act as Receiver of Court / Tribunal Q. The important features of Enforcement of Securities are : a) take possession of the Secured Assets b) take over management of Secured Assets c) recover dues from the debtor of the Borrower d) All the above Q. In which of the following Acts, the provisions of Mortgage of an Asse are dealt with? a) Transfer of Property Act b) Sale of Goods Act c) Negotiable Instrument Act d) Indian Company Law Q. The Bank can enforce the security after going notice and if Borrower does not repay within: a) 30 days b) 60 days c) 75 days d) 90 days Q. The powers of enforcement of security are available to : a) Banking Companies b) Public Financial Institution c) Non-Banking Financial Companies d) (a) and (b) 40

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INSTITUTE OF BANKING STUDIES (IBS) Q. What are the Rights available to a secured creditor? a) To sell the Assets b) File application with DRT for recovery of full or remaining dues c) To proceed against the guarantor d) All the above Q. Which of the following statements, is CORRECT regarding securitization of Asset? a) Bank can take possession of Asset and sale itself or it can handover to Reconstruction company. b) Securitised Company can act as secured creditor c) Securitised company get all the Rights of secured creditor d) All the above Q. Which of the following is CORRECT? a) The Borrower can file an appeal with the DRT only after the secured creditor takes possession of Asset b) Borrower cannot file an appeal in the Civil court c) Writ petition cab be filed in the High court at any time d) All the above Q. Which of the following statements, is not CORRECT? a) The secured creditor has all the Judicial powers. b) The Borrower can get the possession of Asset back if he succeeds in DRT c) The protection of SICA will not be available once the secured creditor takes steps for realization of an Asset d) The Borrower can get compensation from the secured creditor if he succeeds in appeal in DRT Q. Which of the following provisions are CORRECT regarding securitization? a) Performing Assets can be securitized b) Non – Performing assets can also be securitized c) A securitization company can also act as Asset Re-construction Company and vice-versa d) All the above Q. Which of the following are the requirements of a securitized company? a) It should be an independent company b) It should be registered with RBI c) It will be a public financial institution d) All the above Q. Which of the following statements, is CORRECT? a) Securitization company can acquire only financial assets b) The difference between securitization and factoring is that in factoring only existing Receivables can be acquired while in securitization even future Receivables can be acquired c) The purpose of Securitization is to avoid mismatch between Assets and Liabilities d) All the above

Q. The securitization Company can acquire Financial Assets from Banks in the following manner a) By issuing Debentures of Bonds b) By entering into an arrangement with the Bank / Financial Institution c) (a) or (b) d) (a) and (b) Q. What is the role of Qualified Institutional Buyers in the securitization process? a) The qualified investors would invest in the Financial Asset Scheme b) The securitized company issues Security Receipts to qualified investors c) The security Receipt represents undivided interest in the Financial Asset d) The securitized company will realize Financial Assets and redeem the investment Q. Which of the following statements, is CORRECT? a) The qualified investors would be paid out of the realization of Financial Assets b) Any dispute between Bank securitization company and qualified institutional investors would be settled through arbitration c) The lending company sells its loans to the investors through special purpose vehicle d) All the above Q. What are the features of Asset Reconstruction? a) The Right or interest of any Bank is acquired for the purpose of realization of such Assets. b) Non – performing Assets alone can be acquired for Asset reconstruction c) The Assets can be acquired by the Asset Reconstruction Company by issuing Debentures and Bonds or entering into an arrangement with the Bank d) All the above Q. Under what circumstances security cannot be enforced? a) If it is an Agriculture Land b) When the amount due is less than Rs. One lac c) When the Borrower has repaid more than 80% of principal and interest d) All the above Q. Security interest means: a) Right, title and interest of any kind upon property b) Created in favour of any secured creditor c) This includes mortgage. hypothecation and assignment d) All the above Q. When an action for enforcement of security can be initiated? a) When a Borrower is under the liability of secured creditor b) Borrower makes a default in payment of principal and interest c) The loan account is classified as Non-performing Asset ( NPA ) d) All the above 41

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INSTITUTE OF BANKING STUDIES (IBS) Q. What is Non-performing Asset? a) Where repayment of interest of principal or both is in arrears for more than 180 days b) Where loan account is in default for 90 days and above c) When loan account is classified as substandard doubtful or loss Asset by the Bank as per the directions of RBI. d) None of the above Q. Which of the following are the requirements for finding a notice? a) It must be in writing giving the Borrower time of 60 days to discharge the liability b) It must specify that secured creditor has right to exercise any action over the Assets c) It must give details of amount payable by the Borrower and the secured Assets intended to be notice d) All the above Q. For the purpose of reference to CDR, which of the following is not a requirement for including the account in category -1 accounts: a) Standard accounts b) Sub-standard accounts c) Doubtful accounts if the total amount of such account is up to 10% of the total exposure of all banks d) The accounts should be sick or in default for a certain minimum period Q. Which of the following is not correct regarding the reference to CDR: a) In a category – 1 reference can be made by any creditor holding 20% or more shares by value b) In a category – 1 reference can be made by the borrower having support of any creditor holding 20% or more shares by value c) In a category –2 reference can be made by any creditor holding 60% or more shares by value and 75% in number. d) None of the above Q. Implementation of CDR approved restructuring becomes binding on all banks / FI s only when: a) All the lenders agree to implement. b) At least 50% creditors agree to implement c) At least 75% creditors by value share and 60% by number agree to implement d) At least 60% creditors by value share and 75% by number agree to implement Q. To give legal basis to the CDR restructuring, agreements with following features are required to be entered into. (which is not correct): a) Debtor –creditor agreement with a validity period of 90days that can be extended to 180 days b) Inter –creditor agreement with a validity period of 3 years that can be renewed for another 3 years

c) Debtor creditor agreement provides for compulsory implementation of restructured package and inter – creditor agreement provides for stand still position till decision by CDR. d) None of the above Q. Which of the following is not correct regarding to asset classification in case of restructured accounts under CDR. a) Any additional facility given will be classified as standard asset for 90 days b) Existing loans shall continue to be in the category before the restructuring c) If CDR approved package is implemented within 4 months, the asset classification at the time of reference will be restored. d) None of the above Q. In connection with restructuring of accounts of SMEs, which of the following is not correct: a) Non- corporate accounts are eligible irrespective of the amount of loan b) Single bank or multiple banking is eligible. c) Corporate accounts with exposure up to Rs. 10 cr are eligible d) Standard, sub standard, doubtful and loss accounts are eligible Q. Under the provision of SARFAESI act, the disputes can be resolved by: a) A civil court b) High Court or Supreme Court c) Debt Recovery Tribunal or Debt Recovery Appellate Tribunal d) Any of the above Q. Which of the following type of accounts are eligible for initiating action under SARFAESI Act: a) Accounts with outstanding amount Rs. 1 lac and above b) Accounts with outstanding amount up to Rs. 1 lac c) Accounts with outstanding amount of any extent d) Accounts with outstanding amount above Rs. 1 lac Q. In a consortium account, if action is to be initiated under SARFAESI act, which of the following is correct: a) Consent of all banks in the consortium is required b) Consent of banks holding 75% share by value required c) Consent of banks holding 75% share by value and 60% by number is requited d) Consent of banks holding majority share is required Q. Which of the following loan accounts will be eligible for action under SARFAESI Act: a) where the balance is up to Rs. 1 lac b) Where the security is agriculture land only c) Where recovery of 80% or more of the due amount has already been affected 42

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INSTITUTE OF BANKING STUDIES (IBS) d) Where the security is mortgaged or hypothecated to the bank Q. Which of the following accounts is eligible under SARFAESI Act. If other eligibility criteria is fulfilled: a) Pledge of goods b) Lien on shares c) Loan against deposit d) Hypothecation of machinery Q. If the owner of securities objects to the possession, the reasons for not accepting the objection to the given by the bank to the owner under SARFAESI Act, within: a) One week b) 30 days c) 45 days d) there is no such requirement Q. If owner of securities wants to approach DRT against decision of bank for possession, he do so under SARFAESI Act, within: a) One week b) 30 days c) 45 days d) 60 days Q. If owner of securities wants to make an appeal to DRAT against decision of DRT for possession, it can be done under SARFAESI Act, within: a) One week b) 30 days c) 45 days d) 60 days Q. Where owner wants to appeal to DRAT against decision of DRT, under SARFAESI Act, he has to deposit: a) 50% of the amount that can be reduced to 25% by DRAT b) 75% of the amount that can be reduced to 25% by DRAT c) 75% of the amount that can be reduced to nil by DRAT Q. Which of the following a notice must specify in case of foreclosed loans? a) It should cover entire loan liability including installment not due b) Interest payable up to the date of notice of Asset. c) It must mention future interest payable till the date of repayment d) All the above Q. Which of the following are the provisions for joint secured creditors? a) Individual secured creditors cannot take any action unless such right is agreed upon b) Decision will be taken jointly by secured creditors having 75 percent of liability c) The decision taken as above (b) will be binding in all the remaining secured creditors d) All the above Q. How the amount received from the sale of secured Assets would be applied? a) Payment of cash, changes incurred in taking over the Assets and maintaining it b) Discharge of dues of secured creditor c) The remaining amount will be paid to the Borrower entitled

d) In the above manner (a) , (b) and (c) Q. Which of the following statements, is CORRECT? a) Secured creditor may file a case with DRT for the remaining unrealized amount b) No suit can be filed against the secured creditor if it has acted in good faith c) Action against the secured creditor can be taken only if malafied is alleged and established d) All the above Q. Whose assistance can be taken for taking over Assets if the Borrower resists in giving possession of the Asset? a) Chief Metropolitan Magistrate b) District Magistrate c) (a) or (b) d) Superintend of Police Q. Which of the following statements, is CORRECT? a) The secured creditor can take possession of Asset 60 days after giving notice b) The Asset can be sold or transferred c) It is mandatory for District Magistrate or take possession of Asset once written request is received from secured creditor d) All the above Q. What is the procedure of acquiring a secured movable Asset? a) The authorized officer of secured creditor shall prepare a panchnama b) The panchanama should be witnessed by two persons c) If the property is subject to natural decay, the authorized person may sell it at once d) All the above Q. What is the process of valuation of movable secured Assets? a) The authorized officer shall obtain estimated value making payments as if the payment has been made to the Borrower b) Officer can fix reserve price of Asset to be sold. c) The Borrower need not be involved in the process of valuation d) All the above Q. The movable Asset can be sold : a) obtaining quotations from interested buyers b) inviting tenders c) holding public auction d) Any of the above Q. How many days notice is required to be given to Borrower for sale of movable secured Asset? a) 30 days b) 15 days c) 7 days d) 3 days Q. Which of the following are the steps for taking over immovable secured Asset? a) The authorized person shall take possession by delivering possession notice to the Borrower 43

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INSTITUTE OF BANKING STUDIES (IBS) b) A copy of the possession notice shall be affixed on the outdoor of the property c) The possession receipt is also required to be published in two leading news papers locally d) All the above Q. Which of the following statements, is CORRECT regarding valuation of immovable secured Asset/ a) Authorised officer will obtain estimated value from the approved valuer. b) The Borrower need not be involved in the valuation process c) Valuation by approved valuer and fixing of reserve price is mandatory in case of immovable Assets d) All the above Q. Which of the following is the important provision in respect of immovable property which is subject to encumbrances? a) The secured creditor shall vest in the transfree all the right as if the transfer had been made by the Borrower b) All encumbrance know to secured creditor must be disclosed in the advertisement c) The authorized officer may allow the purchase to deposit with him the money required to discharge the encumbrances. d) All the above Q. What are the provisions for appointment of manager for secured Assets? a) The Board of Directors of secured creditor may appoint a manager in consultation with the Borrower to manage secured Assets b) The manager will be deemed to be an agent of Borrower c) The Borrower solely would be responsible for the acts of manager d) All the above Q. Before sale of securities under SARFAESI Act, a notice has to be served on the owner giving him a period of ––––––– days: a) One week b) 30 days c) 45 days d) 60 days Q. On behalf of the bank, which of the following official can initiate action under SARFAESI Act: a) Any officer of the bank b) Any officer authorized by the Board of Scale IV and above c) Scale IV and above only d) Any officer authorized by the Board of Scale II and above Q. In connection with sale of security, which of the following is not correct: a) Minimum sale price can be fixed by the owner of the security b) Reserve price to be fixed by the owner of the security

c) Sale below reserve price can be made with consent of the owner of security d) None of the above Q. The buyer of the securities required to make payment in the following manner: a) 25% immediately and balance within 30 days b) 25% immediately and balance within 25 days c) 25% immediately and balance within 15 days d) 75% immediately and balance within 15 days Q. If a case has been filed in DRT under provisions of RDDB Act, the process of sale of securities can be initiated under SARFAESI Act: a) With permission of Supreme Court b) With permission of RBI c) As per Supreme Court judgment in Mardia chemicals vs. Union of India d) As per Supreme Court judgment in Transcore vs. Union of India Q. A willful loan defaulter, as per RBI guideline is a person, who has been repaying bank loan and (which of the following is not correct) : a) Earning adequate profits from business b) Disposed the assets created with the help of bank finance c) Diverted the business funds outside the business d) None of the above Q. Under the Recovery of Debts due to Banks and Financial Institutions act 1993 (RDDB Act 1993), which of the following are eligible accounts for filing suit with DRT. a) All loans with balance of Rs. 1 lac and above b) Loans with balance of Rs. 10 lac and above c) Loans with balance of Rs. 25 lac and above d) Loans with balance of Rs. 50 lac and above Q. Which of the following is not a correct statement regarding the set up at DRT and DRAT under provisions of RDDB Act: a) DRT is headed by Presiding Officer b) Presiding officer is supported by Registrar and Recovery Officer c) DRAT is headed by President d) None of the above Q. Which of the following is not correct under provision of RDDB act: a) Complaint can be made to Presiding of DRT against the Registrar of grievance against him within 15 days b) Complaint can be made to Presiding of DRT against the Recovery Officer of grievance against him within 15 days c) Appeal can be made to Chairperson of DRAT against decision of Presiding officer of DRT within 30 days. d) None of the above Q. Presiding officer of DRT is expected to take a decision on a suit filed case, within –––––, under provisions of RDDB Act: 44

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INSTITUTE OF BANKING STUDIES (IBS) a) 90 days b) 90 days period can be extended to another 90 days c) 180 days d) No such time frame Q. If borrower wants to make an appeal against decision of DRT Presiding officer to Chairperson of DRAT, it can be done by, under provisions of RDDB Act after: a) Depositing 25% of the amount of decree which can be reduced by DRAT to nil b) Depositing 50% of the amount of decree which can be reduced by DRAT to nil c) Depositing 50% of the amount of decree which can be reduced by DRAT to 25% d) Depositing 75% of the amount of decree which can be reduced by DRAT to nil Q. The appellate authority i.e. DRAT is expected to take a decision on an appeal case, within–––––, under provisions of RDDB Act: a) 3 months b) 3 months period can be extended to another 3 months c) 6 months d) No such time frame Q. Lok Adalts are established under provisions of which of the following: a) Recovery of Debt due to Banks and FI act b) Civil Procedure Code c) SARFAESI Act d) None Q. which of the following statement is not true in regard to jurisdiction of Lok Adalts: a) In a normal Lok Adalt cases up to Rs. 20 lac are referred b) Cases above Rs. 20 lac are referred in DRT Lok Adalt c) In a normal Lok Adalt cases up to Rs. 10 lac and DRT Lok Adalt above Rs. 10 lac d) None of the above Q. An appeal against the decision of Lok Adalt can be made to : a) Distt.court b) High Court c) DRT or DRAT d)None of the above Q. Which of the following RBI guidelines, is not correct in connection with the set up of Lok Adalt: a) Case relating to sub standard account can be referred b) Cases relating to Doubtful and loss account by referred c) Repayment should be made by the borrower up front d) Repayment may be allowed in installments up to 3 years Q. Which of the following are the powers of manager?

a) To recover any money from any person who has acquired secured Asset, from the borrower b) Such amount should become due or may become due in future c) The manager will give valid discharge to person making payment as if the payment has been made to the Borrower d) All the above Q. What are the provisions of depositing 75% amount by the Borrower while submitting appeal? a) No appeal will be entertained unless 75% of the amount is not deposited b) DRT can waive or reduce the amount required to be deposited c) The amount will include installments which were not due d) All the above Q. What are the important features of securitisation? a) It is a process through which illiquid Assets are transferred into more liquid form of Assets. b) The lending institution’s Assets are transferred into more liquid form of Assets c) These Assets are funded by investors through a negotiable financial instrument d) All the above Q. What is the role of special purchase vehicle (SPV) in the process of securitisation? a) It is an intermediary between seller of financial Assets b) SPV receives money from investors and pays to the transferer. c) The investors are paid out of the Assets realized over a period of time d) All the above Q. The essential features of pass through certificates are : a) A direct, participation in the cash flow is sold b) Receipt of Asset cash flow is deposited in a designated account c) The funds are passed on to certificate holders d) All the above Q. The essential features of pay through certificates are : a) It involves specific sale of asset cash flow to SPV b) The SPV issues pay through certificates to the investors c) The cash is collected by the SPV from the Borrower and then distributed to certificate holders d) All the above Q. What are the pre-requisites for forming a securitized company? a) It must obtain registration certificate from the RBI b) Minimum owned funds of Rs 2 crore c) The maximum amount of owned funds should not exceed 15% of total financial Assets acquired or to be acquired. d) All the above 45

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INSTITUTE OF BANKING STUDIES (IBS) Q. What are the steps an Asset Reconstruction Company can take? a) Proper management of the business of the Borrower b) Sale or lease of a part of whole of business of Borrower c) Re – scheduling the payment of debt d) All the above Q. Which of the following measures the Asset Reconstruction Company cannot undertake? a) It can acquire standard Assets of Banks b) It can enforce security interest c) It can settle the dues payable by the Borrower d) It can take possession of secured Assets Q. What are the important benefits of SARFAESI Act, 2002 to the Banks? a) The Banks can realise Assets by selling or leasing without intervention of court b) Manage Asset-Liability mis-matches c) Improve liquidity and recovery position d) All the above Q. In case of grievance, what are the various forums available to the borrower to appeal? a) DRT and DRAT b) High Court c) Supreme Court d) All these Q. When was the first Asset Reconstruction Company set up? a) August, 2003 b) Dec, 2003 c) March, 2004 d) June, 2003 Q. Which of the following Banks were major promoters of First Asset Reconstruction Company? a) Sate Bank of India b) ICICI Bank c) IDBI d) All these Q. What was the capital contribution of major participating Banks in promoting the First Asset Reconstruction Company? a) 5.3% b) 24.5% c) 33.3% d) 20%

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INSTITUTE OF BANKING STUDIES (IBS)

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IBS,2nd Floor, Centre Point, Near Head Post Office, Kayamkulam, 0479 2144316, 9447873644