10+ Assistant Credit Manager Interview Questions and Answers

Operating cycle is the time it takes for a business to convert inventory into cash.

• Operating cycle = Inventory conversion period + Receivables conversion period

• Inventory conversion period = (Average inventory / Cost of goods sold) x 365

• Receivables conversion period = (Average accounts receivable / Credit sales) x 365

• Operating cycle helps in determining the efficiency of a business in managing its working capital

• A shorter operating cycle indicates better efficiency and liquidi...read more

Important ratios used in credit and financial analysis include debt-to-equity, current ratio, and gross profit margin.

• Debt-to-equity ratio measures a company's leverage and financial risk

• Current ratio measures a company's ability to pay its short-term debts

• Gross profit margin measures a company's profitability

• Other important ratios include return on equity, interest coverage, and inventory turnover

• These ratios help assess a company's financial health and creditworthiness

Factors and points to check while processing a loan application

• Credit score and history

• Income and employment status

• Debt-to-income ratio

• Collateral

• Purpose of the loan

• Repayment plan

• Credit report

• Legal documentation

Working capital is the amount of money a company has available to fund its day-to-day operations.

• Working capital is calculated by subtracting current liabilities from current assets.

• Current assets include cash, accounts receivable, and inventory.

• Current liabilities include accounts payable, taxes owed, and short-term loans.

• A positive working capital indicates that a company has enough funds to cover its short-term obligations.

• A negative working capital indicates that a compan...read more

DSCR stands for Debt Service Coverage Ratio. It is a financial metric used to assess a borrower's ability to repay debt.

• DSCR is calculated by dividing the borrower's net operating income by their total debt service.

• A DSCR of 1 or higher indicates that the borrower has enough income to cover their debt obligations.

• A DSCR below 1 suggests that the borrower may struggle to meet their debt payments.

• Lenders typically prefer a higher DSCR as it indicates lower risk.

• For example, if ...read more

Illiterate women in the field pose challenges in credit management.

• Communication barriers due to illiteracy

• Difficulty in understanding financial concepts and terms

• Limited access to information and resources

• Higher risk of fraud or misinterpretation of credit terms

• Need for tailored financial literacy programs

• Importance of building trust and establishing clear communication channels

KYC stands for Know Your Customer.

• KYC is a process used by financial institutions to verify the identity of their customers.

• It involves collecting and verifying customer information to prevent fraud, money laundering, and other illegal activities.

• KYC typically includes gathering personal details, identification documents, and proof of address.

• Financial institutions are required by law to perform KYC procedures for their customers.

• KYC helps in building trust, reducing risks, a...read more

Cash Credit becomes NPA when the borrower fails to repay the loan within the stipulated time period.

• Non-payment of EMIs

• Defaulting on interest payments

• Lack of adequate collateral

• Economic downturn affecting borrower's ability to repay

• Fraudulent activities by the borrower

Fraud cases can be found by analyzing transaction patterns and conducting thorough investigations.

• Analyze transaction patterns for any unusual activity

• Conduct thorough investigations of suspicious transactions

• Use fraud detection software to flag potential cases

• Monitor customer behavior for any red flags

• Stay up-to-date on industry trends and common fraud schemes

• Collaborate with law enforcement and other financial institutions to share information

• Train employees on fraud preven...read more

MPBF stands for Maximum Permissible Bank Finance.

• MPBF is the maximum amount of credit that a bank can extend to a borrower based on their financial statements and creditworthiness.

• It is calculated by considering factors such as the borrower's working capital, profitability, and repayment capacity.

• MPBF helps banks determine the maximum amount of loan they can provide to a borrower without exceeding the risk threshold.

• For example, if a company has a strong financial position an...read more