CFI CBCA Certification Exam (Actual Exam) | Certified Banking and Credit Analyst (CBCA) Certification
Exam | Corporate Finance Institute (CFI) || Most Recent Exam|| Actual Complete Real Exam Questions
CFI CBCA - 200Q Revision with Reasonable Rationales
CBCA covers accounting, industry analysis, business analysis, management assessment, financial analysis, loan security,
credit evaluation and documentation, review procedures, financial analysis, credit structuring, covenant modeling, cash flow
analysis, loan repayments, commercial banking, credit risk analysis, lending decisions, loan structuring, financial statement
analysis, business valuation, financial modeling.
Question 1: CBCA 5 Cs of Credit include?
A. Character, Capacity, Capital, Collateral, Conditions
B. No Cs
C. Only Collateral
D. Only Character
Answer:
A. Rationale: 5 Cs framework: Character (borrower integrity/history), Capacity (cash flow to service debt), Capital (equity skin in
game), Collateral (security), Conditions (industry/economic). Assesses creditworthiness holistically, not just collateral.
Question 2: Capacity analysis focuses on?
A. Only market conditions
B. Cash flow to service debt - EBITDA, FCFF, DSCR, debt capacity
C. Only character
D. Only collateral value
Answer:
B. Rationale: Capacity is ability to repay from operations. Analyze EBITDA, free cash flow, DSCR = CFADS / Debt Service. DSCR
<1.0 insufficient cash. Capacity most critical C for commercial loans.
Question 3: DSCR calculation?
A. CFADS / (Principal + Interest)
B. No calculation
C. Interest only
D. Principal only
Answer:
A. Rationale: Debt Service Coverage Ratio = Cash Flow Available for Debt Service divided by total debt service (principal+interest).
Lenders typically require 1.2-1.5x minimum. Measures cushion.
Question 4: EBITDA vs Cash Flow - why adjust?
A. No adjustment
B. Same as cash flow
C. Only EBITDA matters
D. EBITDA excludes non-cash and non-operating but not capex, working capital, taxes; need FCFF for debt capacity
Answer:
D. Rationale: EBITDA overstates cash available because ignores capex, working capital change, taxes, interest. For credit, use free
cash flow after maintenance capex and working capital to see true debt service ability.
Page 1 | CFI CBCA - 200Q
,Question 5: Loan security - perfected security interest requires?
A. No requirement
B. Security agreement, value given, debtor rights in collateral, plus UCC filing or possession/control to perfect
C. Only agreement
D. Only filing
Answer:
B. Rationale: Attachment requires agreement, value, rights. Perfection requires public notice: UCC-1 filing for most goods,
possession for pledged assets, control for deposit accounts/securities. Unperfected = unsecured vs other creditors.
Question 6: Covenants - financial vs non-financial?
A. No covenants
B. Only financial
C. Financial: maintenance (DSCR, leverage, current ratio) tested periodically; Non-financial: reporting, insurance, no asset sale
D. Only non-financial
Answer:
C. Rationale: Covenants protect lender. Financial maintenance covenants (e.g., maintain DSCR>1.2x) monitored quarterly.
Incurrence covenants limit actions if triggered. Non-financial require timely financials, insurance, restrict dividends/assets sales.
Question 7: Industry analysis - Porter's 5 Forces helps assess?
A. Only buyers
B. No help
C. Industry profitability and risk: threat of new entrants, suppliers, buyers, substitutes, rivalry affects Conditions C
D. Only suppliers
Answer:
C. Rationale: 5 Forces determines industry attractiveness and borrower risk. High rivalry or buyer power pressures margins, affects
borrower's capacity. Used in Conditions assessment for credit.
Question 8: Management assessment includes?
A. Only education
B. Track record, depth, succession, integrity, strategy, governance
C. No assessment
D. Only age
Answer:
B. Rationale: Character and management quality critical: experience, depth (key person risk), integrity, strategic vision, governance.
Weak management increases credit risk even with good financials.
Question 9: Loan structure - revolver vs term loan?
A. Same
B. Only term exists
C. Only revolver exists
D. Revolver for working capital seasonal needs, fluctuates, borrowing base; Term loan for capex/acquisition, amortizing, fixed
purpose
Answer:
D. Rationale: Revolver = short-term working capital, revolving, often secured by AR/inventory with borrowing base. Term loan =
longer-term for fixed assets/acquisition, amortized over years. Structure must match use (matching principle).
Page 2 | CFI CBCA - 200Q
,Question 10: Borrowing base for ABL revolver?
A. Eligible AR (e.g., <90 days) x advance rate 80% + eligible inventory x 50% - reserves = availability
B. No base
C. Only inventory
D. Only fixed assets
Answer:
A. Rationale: Asset-based lending advances against collateral value with haircuts for risk. Eligible excludes aged AR, related party,
foreign. Reserves for rent, priority claims. Determines how much borrower can draw.
Question 11: LGD - Loss Given Default depends on?
A. No dependence
B. Collateral value, seniority, industry, recovery costs
C. Only interest rate
D. Only default probability
Answer:
B. Rationale: LGD = 1 - recovery rate. Secured senior loans recover more than unsecured subordinated. Collateral quality and LTV
drive recovery. Used in expected loss = PD x LGD x EAD.
Question 12: PD - Probability of Default modeled by?
A. Only collateral
B. Only gut feel
C. No model
D. Financial ratios, credit scores, Merton model, transition matrices
Answer:
D. Rationale: PD estimation uses quantitative (Altman Z-score, financial ratios, cash flow) and qualitative factors, market-based
Merton (distance to default), and rating migrations. Required for Basel expected loss.
Question 13: Cash flow waterfall in credit agreement?
A. No waterfall
B. Revenue -> COGS -> Opex -> taxes -> capex -> debt service -> dividends - priority of cash use
C. Only dividends first
D. Only debt first
Answer:
B. Rationale: Waterfall shows order: operating cash first covers operating needs and taxes, then maintenance capex, then debt
service, then discretionary (growth capex, dividends). Lender ensures debt service prioritized before distributions.
Question 14: Debt to EBITDA leverage covenant typical?
A. Total Debt / EBITDA <3.0-4.0x for investment grade, higher for leveraged; measures leverage
B. Only equity
C. Only interest
D. No leverage
Answer:
A. Rationale: Leverage = Total Debt/EBITDA measures how many years of EBITDA to repay debt. Higher leverage = higher risk.
Covenant typically <3-4x for commercial, covenant breach triggers default even if paying.
Page 3 | CFI CBCA - 200Q
, Question 15: Working capital analysis for credit?
A. Only cash
B. No analysis
C. Only current ratio
D. Current ratio, quick ratio, cash conversion cycle (DSO+ DIO - DPO) - longer cycle needs more working capital financing
Answer:
D. Rationale: Working capital needs drive revolver usage. CCC = days to convert inventory and receivables to cash minus payable
days. Longer CCC means more cash tied up, higher financing need. Analyze trends for deterioration.
Question 16: Loan documentation includes?
A. Only term sheet
B. Only promissory note
C. Credit agreement, term sheet, promissory note, security agreement, guaranty, intercreditor agreement, compliance certificate
D. No docs
Answer:
C. Rationale: Full documentation: credit agreement defines terms/covenants, note is promise to pay, security agreement grants lien,
guaranty from parent/owner, intercreditor defines priority among lenders, compliance cert confirms covenant compliance.
Question 17: Credit risk mitigation - diversification?
A. Only one borrower
B. Only one industry
C. No mitigation
D. Portfolio diversification across industries, geography, product types reduces concentration risk
Answer:
D. Rationale: Concentration in one industry (e.g., all oil) increases portfolio risk if industry downturn. Diversification reduces
unexpected loss. Banks set concentration limits.
Question 18: Financial statement analysis - red flags?
A. No red flags
B. Only growth is red flag
C. Only profit is red flag
D. Declining margins, rising DSO/DIO, increasing leverage, negative free cash flow, related party transactions, qualified audit
opinion
Answer:
D. Rationale: Red flags signal deteriorating credit: margin compression, working capital buildup (DSO rising means collection
issues), rising leverage, cash burn, related party self-dealing, going concern qualification. Requires deeper diligence.
Question 19: Enterprise Value vs Equity Value in credit?
A. No difference
B. EV = Equity + Debt - Cash, represents total firm value available to all capital providers; used for EV/EBITDA valuation
C. Same
D. Only equity matters
Answer:
B. Rationale: EV is total firm value, relevant for credit as debt claims against EV. EV/EBITDA compares valuation across leverage.
Equity value is after debt, residual.
Page 4 | CFI CBCA - 200Q
Exam | Corporate Finance Institute (CFI) || Most Recent Exam|| Actual Complete Real Exam Questions
CFI CBCA - 200Q Revision with Reasonable Rationales
CBCA covers accounting, industry analysis, business analysis, management assessment, financial analysis, loan security,
credit evaluation and documentation, review procedures, financial analysis, credit structuring, covenant modeling, cash flow
analysis, loan repayments, commercial banking, credit risk analysis, lending decisions, loan structuring, financial statement
analysis, business valuation, financial modeling.
Question 1: CBCA 5 Cs of Credit include?
A. Character, Capacity, Capital, Collateral, Conditions
B. No Cs
C. Only Collateral
D. Only Character
Answer:
A. Rationale: 5 Cs framework: Character (borrower integrity/history), Capacity (cash flow to service debt), Capital (equity skin in
game), Collateral (security), Conditions (industry/economic). Assesses creditworthiness holistically, not just collateral.
Question 2: Capacity analysis focuses on?
A. Only market conditions
B. Cash flow to service debt - EBITDA, FCFF, DSCR, debt capacity
C. Only character
D. Only collateral value
Answer:
B. Rationale: Capacity is ability to repay from operations. Analyze EBITDA, free cash flow, DSCR = CFADS / Debt Service. DSCR
<1.0 insufficient cash. Capacity most critical C for commercial loans.
Question 3: DSCR calculation?
A. CFADS / (Principal + Interest)
B. No calculation
C. Interest only
D. Principal only
Answer:
A. Rationale: Debt Service Coverage Ratio = Cash Flow Available for Debt Service divided by total debt service (principal+interest).
Lenders typically require 1.2-1.5x minimum. Measures cushion.
Question 4: EBITDA vs Cash Flow - why adjust?
A. No adjustment
B. Same as cash flow
C. Only EBITDA matters
D. EBITDA excludes non-cash and non-operating but not capex, working capital, taxes; need FCFF for debt capacity
Answer:
D. Rationale: EBITDA overstates cash available because ignores capex, working capital change, taxes, interest. For credit, use free
cash flow after maintenance capex and working capital to see true debt service ability.
Page 1 | CFI CBCA - 200Q
,Question 5: Loan security - perfected security interest requires?
A. No requirement
B. Security agreement, value given, debtor rights in collateral, plus UCC filing or possession/control to perfect
C. Only agreement
D. Only filing
Answer:
B. Rationale: Attachment requires agreement, value, rights. Perfection requires public notice: UCC-1 filing for most goods,
possession for pledged assets, control for deposit accounts/securities. Unperfected = unsecured vs other creditors.
Question 6: Covenants - financial vs non-financial?
A. No covenants
B. Only financial
C. Financial: maintenance (DSCR, leverage, current ratio) tested periodically; Non-financial: reporting, insurance, no asset sale
D. Only non-financial
Answer:
C. Rationale: Covenants protect lender. Financial maintenance covenants (e.g., maintain DSCR>1.2x) monitored quarterly.
Incurrence covenants limit actions if triggered. Non-financial require timely financials, insurance, restrict dividends/assets sales.
Question 7: Industry analysis - Porter's 5 Forces helps assess?
A. Only buyers
B. No help
C. Industry profitability and risk: threat of new entrants, suppliers, buyers, substitutes, rivalry affects Conditions C
D. Only suppliers
Answer:
C. Rationale: 5 Forces determines industry attractiveness and borrower risk. High rivalry or buyer power pressures margins, affects
borrower's capacity. Used in Conditions assessment for credit.
Question 8: Management assessment includes?
A. Only education
B. Track record, depth, succession, integrity, strategy, governance
C. No assessment
D. Only age
Answer:
B. Rationale: Character and management quality critical: experience, depth (key person risk), integrity, strategic vision, governance.
Weak management increases credit risk even with good financials.
Question 9: Loan structure - revolver vs term loan?
A. Same
B. Only term exists
C. Only revolver exists
D. Revolver for working capital seasonal needs, fluctuates, borrowing base; Term loan for capex/acquisition, amortizing, fixed
purpose
Answer:
D. Rationale: Revolver = short-term working capital, revolving, often secured by AR/inventory with borrowing base. Term loan =
longer-term for fixed assets/acquisition, amortized over years. Structure must match use (matching principle).
Page 2 | CFI CBCA - 200Q
,Question 10: Borrowing base for ABL revolver?
A. Eligible AR (e.g., <90 days) x advance rate 80% + eligible inventory x 50% - reserves = availability
B. No base
C. Only inventory
D. Only fixed assets
Answer:
A. Rationale: Asset-based lending advances against collateral value with haircuts for risk. Eligible excludes aged AR, related party,
foreign. Reserves for rent, priority claims. Determines how much borrower can draw.
Question 11: LGD - Loss Given Default depends on?
A. No dependence
B. Collateral value, seniority, industry, recovery costs
C. Only interest rate
D. Only default probability
Answer:
B. Rationale: LGD = 1 - recovery rate. Secured senior loans recover more than unsecured subordinated. Collateral quality and LTV
drive recovery. Used in expected loss = PD x LGD x EAD.
Question 12: PD - Probability of Default modeled by?
A. Only collateral
B. Only gut feel
C. No model
D. Financial ratios, credit scores, Merton model, transition matrices
Answer:
D. Rationale: PD estimation uses quantitative (Altman Z-score, financial ratios, cash flow) and qualitative factors, market-based
Merton (distance to default), and rating migrations. Required for Basel expected loss.
Question 13: Cash flow waterfall in credit agreement?
A. No waterfall
B. Revenue -> COGS -> Opex -> taxes -> capex -> debt service -> dividends - priority of cash use
C. Only dividends first
D. Only debt first
Answer:
B. Rationale: Waterfall shows order: operating cash first covers operating needs and taxes, then maintenance capex, then debt
service, then discretionary (growth capex, dividends). Lender ensures debt service prioritized before distributions.
Question 14: Debt to EBITDA leverage covenant typical?
A. Total Debt / EBITDA <3.0-4.0x for investment grade, higher for leveraged; measures leverage
B. Only equity
C. Only interest
D. No leverage
Answer:
A. Rationale: Leverage = Total Debt/EBITDA measures how many years of EBITDA to repay debt. Higher leverage = higher risk.
Covenant typically <3-4x for commercial, covenant breach triggers default even if paying.
Page 3 | CFI CBCA - 200Q
, Question 15: Working capital analysis for credit?
A. Only cash
B. No analysis
C. Only current ratio
D. Current ratio, quick ratio, cash conversion cycle (DSO+ DIO - DPO) - longer cycle needs more working capital financing
Answer:
D. Rationale: Working capital needs drive revolver usage. CCC = days to convert inventory and receivables to cash minus payable
days. Longer CCC means more cash tied up, higher financing need. Analyze trends for deterioration.
Question 16: Loan documentation includes?
A. Only term sheet
B. Only promissory note
C. Credit agreement, term sheet, promissory note, security agreement, guaranty, intercreditor agreement, compliance certificate
D. No docs
Answer:
C. Rationale: Full documentation: credit agreement defines terms/covenants, note is promise to pay, security agreement grants lien,
guaranty from parent/owner, intercreditor defines priority among lenders, compliance cert confirms covenant compliance.
Question 17: Credit risk mitigation - diversification?
A. Only one borrower
B. Only one industry
C. No mitigation
D. Portfolio diversification across industries, geography, product types reduces concentration risk
Answer:
D. Rationale: Concentration in one industry (e.g., all oil) increases portfolio risk if industry downturn. Diversification reduces
unexpected loss. Banks set concentration limits.
Question 18: Financial statement analysis - red flags?
A. No red flags
B. Only growth is red flag
C. Only profit is red flag
D. Declining margins, rising DSO/DIO, increasing leverage, negative free cash flow, related party transactions, qualified audit
opinion
Answer:
D. Rationale: Red flags signal deteriorating credit: margin compression, working capital buildup (DSO rising means collection
issues), rising leverage, cash burn, related party self-dealing, going concern qualification. Requires deeper diligence.
Question 19: Enterprise Value vs Equity Value in credit?
A. No difference
B. EV = Equity + Debt - Cash, represents total firm value available to all capital providers; used for EV/EBITDA valuation
C. Same
D. Only equity matters
Answer:
B. Rationale: EV is total firm value, relevant for credit as debt claims against EV. EV/EBITDA compares valuation across leverage.
Equity value is after debt, residual.
Page 4 | CFI CBCA - 200Q
