CLFP – Credit Exam questions and answers Graded
A+
Fundamentally, _________ risk is the chance of not receiving money back in a
timely manner and as agreed.
Credit
What is considered the process in lending that determines the acceptability of a
proposed transaction based on the inherent risk of the deal and the lender's or
lessor's credit policies?
Underwriting
The role of a credit analyst in an equipment finance company is to make decisions
within the parameters 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.
Five
One way to think about credit in a lending organization is within the context of a
"____________" framework of which credit policy is a component. This
framework is a foundation for making decisions.
Risk appetite
The following equation is used to determine the expected loss:
% PD * LGD * EAD = Expected Loss
In this equation, what does 'PD' refer to?
Probability of Default (PD), provides an estimate of the likelihood that a borrower
will be unable to repay debt obligations.
Although each company may define these ranges slightly different, a large-ticket
transaction is generally considered as the following:
Transactions over $5,000,000
, What type of transactions are often credit scored and may also use automatic
credit decisions?
Small-ticket transactions
The level of due diligence for a credit evaluation will likely vary based on what
factors?
- The origination channel (source of business).
- The size of the transaction.
- The risk appetite framework of the lessor/lender.
Knowing the origination channel is important when evaluating credit. The most
important reason to know where a transaction is coming from is
______________.
The inherent risk in various origination channels.
With __________, the lender/lessor is directly interacting with the end-user
customer. With _________, the lender/lessor is once removed from the end-user
customer and relies on the originator for much of the customer interaction.
Direct origination;
Third-Party Origination
An additional level of due diligence for the third-party origination channel and the
vendor origination channel is.
Source credit approval process
What does "KYC" stand for?
Know Your Customer
KYC - Know Your Customer
- Understand the entity
- Identify owners
- Balance of Due Diligence vs Cost vs Risk
- Background checks avoid terrorist activity
- Fraud Prevention
- Know the entity type (Corp, LC, Sole Prop, etc.)
A+
Fundamentally, _________ risk is the chance of not receiving money back in a
timely manner and as agreed.
Credit
What is considered the process in lending that determines the acceptability of a
proposed transaction based on the inherent risk of the deal and the lender's or
lessor's credit policies?
Underwriting
The role of a credit analyst in an equipment finance company is to make decisions
within the parameters 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.
Five
One way to think about credit in a lending organization is within the context of a
"____________" framework of which credit policy is a component. This
framework is a foundation for making decisions.
Risk appetite
The following equation is used to determine the expected loss:
% PD * LGD * EAD = Expected Loss
In this equation, what does 'PD' refer to?
Probability of Default (PD), provides an estimate of the likelihood that a borrower
will be unable to repay debt obligations.
Although each company may define these ranges slightly different, a large-ticket
transaction is generally considered as the following:
Transactions over $5,000,000
, What type of transactions are often credit scored and may also use automatic
credit decisions?
Small-ticket transactions
The level of due diligence for a credit evaluation will likely vary based on what
factors?
- The origination channel (source of business).
- The size of the transaction.
- The risk appetite framework of the lessor/lender.
Knowing the origination channel is important when evaluating credit. The most
important reason to know where a transaction is coming from is
______________.
The inherent risk in various origination channels.
With __________, the lender/lessor is directly interacting with the end-user
customer. With _________, the lender/lessor is once removed from the end-user
customer and relies on the originator for much of the customer interaction.
Direct origination;
Third-Party Origination
An additional level of due diligence for the third-party origination channel and the
vendor origination channel is.
Source credit approval process
What does "KYC" stand for?
Know Your Customer
KYC - Know Your Customer
- Understand the entity
- Identify owners
- Balance of Due Diligence vs Cost vs Risk
- Background checks avoid terrorist activity
- Fraud Prevention
- Know the entity type (Corp, LC, Sole Prop, etc.)
