The fundamental credit analysis approach consists of:

8 steps

12 steps

4 steps

When analysts assess the exposure at default they obtain:

Only an understanding of the type of financing

Only an understanding of the intended use of the loan

Both option 1 and option 2

When estimating the probability of default:

An analysis of the firms financial health is crucial

An analysis of the peers financial health is crucial

Neither option 1 nor option 2

When estimating the probability of recovery:

The available security and collaterals are assessed and liquidation value measured

Book value of equity is used as indicator of the liquidation value

Neither option 1 nor option 2

Credit ratings is purely based on:

Qualitative data

Quantitative data

All of the above

According to Standard & Poors rating scheme a BBB-rating corresponds to:

A speculative grade

An investment grade

It depends sometimes an investment grade and other times a speculative grade

Forecasting is a better and more efficient way of assessing the credit risk than using financial ratios:

False

Correct

It depends if resources are scarce a credit rating based on financial ratios may prove more cost-efficient

Creditors generally prefer a collateral based on intangible assets as compared to tangible assets:

Correct

False

None of the above

The credit spread of a B-rating is between:

3.2%-13.2%

0.8%-3.6%

0.6%-1.9%

According to Altmans Z-score the chances of bankruptcy is high when the Z-score is:

Below 1.81

Above 2.99

Between 1.81-2.99