CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
1. What is risk mitigation in credit decisions? a. The process of reducing
a. The process of reducing the potential losses from the potential losses from
credit defaults credit defaults
b. The process of increasing the credit quality of the
transactions
c. The process of assigning credit scores to customers
d. The process of using technology to streamline the
credit processes
2. What are credit enhancements in credit decisions? c. Features that improve
a. Features that reduce the interest rate of the trans- the credit quality of the
actions transactions
b. Features that increase the collateral value of the
transactions
c. Features that improve the credit quality of the trans-
actions
d. Features that speed up the approval of the transac-
tions
3. What are credit scoring models in credit decisions? d. All of the above
a. Mathematical formulas that assign credit scores to
customers
b. Statistical methods that estimate the probability of
default
c. Automated algorithms that make credit decisions
d. All of the above
4. What are the five Cs of credit in credit decisions? b. Collateral, character,
a. Credit, capacity, collateral, character, and condi- cash flow, capital, and
tions conditions
b. Collateral, character, cash flow, capital, and condi-
tions
, CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
c. Credit, cash flow, capital, covenants, and coverage
d. Capacity, collateral, character, coverage, and consis-
tency
5. What does EBITDA stand for? c. Earnings Before Inter-
a. Earnings Before Investment, Trade, Discount, and est, Tax, Depreciation, and
Appreciation Amortization
b. Earnings Based on Interest, Trade, Dividend, and
Appreciation
c. Earnings Before Interest, Tax, Depreciation, and
Amortization
d. Earnings Before Investment, Trade, Discount, and
Appreciation
6. What is the formula for calculating the debt-service a. DSCR = Net Operating
coverage ratio (DSCR)? Income / Total Debt Ser-
a. DSCR = Net Operating Income / Total Debt Service vice
b. DSCR = Gross Operating Income / Total Debt Ser-
vice
c. DSCR = Net Operating Income / Total Interest Ex-
pense
d. DSCR = Gross Operating Income / Total Interest
Expense
7. What is portfolio-level credit risk management in cred- d. All of the above
it decisions?
a. The process of evaluating credit risk and granting
credit for individual transactions
b. The process of monitoring the performance of
deals that are already on the books
c. The process of reducing the exposure to certain
, CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
types of risk within the portfolio
d. All of the above
8. What is the main purpose of a global cash flow analy- c. To combine the busi-
sis when credit analysts require personal guarantees? ness and the guarantor's
a. To determine the net worth of the guarantor cash flow situation
b. To assess the availability of the guarantor's assets
in case of default
c. To combine the business and the guarantor's cash
flow situation
d. To compare the guarantor's income and expenses
with industry benchmarks
9. Fundamentally, risk is the chance of not b. Credit
receiving money back in a timely manner and as
agreed.
Select one:
a. Legal
b. Credit
c. Compliance
d. Business
10. What is considered the process in lending that de- b. Underwriting
termines the acceptability of a proposed transaction
based on the inherent risk of the deal and the lender's
or lessor's credit policies?
Select one:
a. Documentation
b. Underwriting
c. Origination
d. Business risk analysis
11. b. Five
, CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
The role of a credit analyst in an equipment finance
company is to make decisions within the parame-
ters of an organization's risk appetite. The ultimate
question to be answered: does the transaction make
sense? Considering the "Cs" of credit can help in
answering these questions.
Select one:
a. Four
b. Five
c. Seven
d. Six
12. One way to think about credit in a lending organiza- b. Risk appetite
tion is within the context of a " " framework
of which credit policy is a component. This framework
is a foundation for making decisions.
Select one:
a. Relationship
b. Risk appetite
c. Guidelines
d. Procedures
13. The following equation is used to determine the ex- d. PD provides an esti-
pected loss: mate of the likelihood that
% PD * LGD * EAD = Expected Loss a borrower will be unable
In this equation, what does 'PD' refer to? to repay debt obligations.
Select one:
a. PD refers to the amount of money a bank or other
financial institution would lose should a borrower de-
fault on loan.
b. PD is a lessor's post-default judgment.
c. PD is a lessor's exposure at default.
Questions and Answers 2026
1. What is risk mitigation in credit decisions? a. The process of reducing
a. The process of reducing the potential losses from the potential losses from
credit defaults credit defaults
b. The process of increasing the credit quality of the
transactions
c. The process of assigning credit scores to customers
d. The process of using technology to streamline the
credit processes
2. What are credit enhancements in credit decisions? c. Features that improve
a. Features that reduce the interest rate of the trans- the credit quality of the
actions transactions
b. Features that increase the collateral value of the
transactions
c. Features that improve the credit quality of the trans-
actions
d. Features that speed up the approval of the transac-
tions
3. What are credit scoring models in credit decisions? d. All of the above
a. Mathematical formulas that assign credit scores to
customers
b. Statistical methods that estimate the probability of
default
c. Automated algorithms that make credit decisions
d. All of the above
4. What are the five Cs of credit in credit decisions? b. Collateral, character,
a. Credit, capacity, collateral, character, and condi- cash flow, capital, and
tions conditions
b. Collateral, character, cash flow, capital, and condi-
tions
, CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
c. Credit, cash flow, capital, covenants, and coverage
d. Capacity, collateral, character, coverage, and consis-
tency
5. What does EBITDA stand for? c. Earnings Before Inter-
a. Earnings Before Investment, Trade, Discount, and est, Tax, Depreciation, and
Appreciation Amortization
b. Earnings Based on Interest, Trade, Dividend, and
Appreciation
c. Earnings Before Interest, Tax, Depreciation, and
Amortization
d. Earnings Before Investment, Trade, Discount, and
Appreciation
6. What is the formula for calculating the debt-service a. DSCR = Net Operating
coverage ratio (DSCR)? Income / Total Debt Ser-
a. DSCR = Net Operating Income / Total Debt Service vice
b. DSCR = Gross Operating Income / Total Debt Ser-
vice
c. DSCR = Net Operating Income / Total Interest Ex-
pense
d. DSCR = Gross Operating Income / Total Interest
Expense
7. What is portfolio-level credit risk management in cred- d. All of the above
it decisions?
a. The process of evaluating credit risk and granting
credit for individual transactions
b. The process of monitoring the performance of
deals that are already on the books
c. The process of reducing the exposure to certain
, CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
types of risk within the portfolio
d. All of the above
8. What is the main purpose of a global cash flow analy- c. To combine the busi-
sis when credit analysts require personal guarantees? ness and the guarantor's
a. To determine the net worth of the guarantor cash flow situation
b. To assess the availability of the guarantor's assets
in case of default
c. To combine the business and the guarantor's cash
flow situation
d. To compare the guarantor's income and expenses
with industry benchmarks
9. Fundamentally, risk is the chance of not b. Credit
receiving money back in a timely manner and as
agreed.
Select one:
a. Legal
b. Credit
c. Compliance
d. Business
10. What is considered the process in lending that de- b. Underwriting
termines the acceptability of a proposed transaction
based on the inherent risk of the deal and the lender's
or lessor's credit policies?
Select one:
a. Documentation
b. Underwriting
c. Origination
d. Business risk analysis
11. b. Five
, CLFP Exam Prep Credit & Documentation
Questions and Answers 2026
The role of a credit analyst in an equipment finance
company is to make decisions within the parame-
ters of an organization's risk appetite. The ultimate
question to be answered: does the transaction make
sense? Considering the "Cs" of credit can help in
answering these questions.
Select one:
a. Four
b. Five
c. Seven
d. Six
12. One way to think about credit in a lending organiza- b. Risk appetite
tion is within the context of a " " framework
of which credit policy is a component. This framework
is a foundation for making decisions.
Select one:
a. Relationship
b. Risk appetite
c. Guidelines
d. Procedures
13. The following equation is used to determine the ex- d. PD provides an esti-
pected loss: mate of the likelihood that
% PD * LGD * EAD = Expected Loss a borrower will be unable
In this equation, what does 'PD' refer to? to repay debt obligations.
Select one:
a. PD refers to the amount of money a bank or other
financial institution would lose should a borrower de-
fault on loan.
b. PD is a lessor's post-default judgment.
c. PD is a lessor's exposure at default.
