Associate Credit Analyst Interview Questions and Answers

Coverage ratios are financial ratios used to measure a company's ability to meet its financial obligations.

• Coverage ratios are used to assess a company's ability to pay its debts and interest on those debts.

• Common coverage ratios include debt service coverage ratio, interest coverage ratio, and fixed charge coverage ratio.

• Debt service coverage ratio measures a company's ability to pay its debt obligations, interest coverage ratio measures its ability to pay interest on its de...read more

Profitability ratios are financial metrics used to evaluate a company's ability to generate profits relative to its expenses and other costs.

• Profitability ratios measure a company's ability to generate profits relative to its revenue, assets, and equity.

• Common profitability ratios include gross profit margin, net profit margin, return on assets, and return on equity.

• These ratios are important for investors and creditors to assess a company's financial health and potential for...read more

Capital employed refers to the total amount of capital invested in a business.

• It includes both equity and debt financing.

• It is calculated by subtracting current liabilities from total assets.

• It is an important metric for evaluating a company's financial health and efficiency.

• Example: If a company has $10 million in assets and $5 million in liabilities, its capital employed would be $5 million.

• It is also known as invested capital or total capital.

DSCR stands for Debt Service Coverage Ratio.

• DSCR is a financial ratio used to measure a company's ability to pay its debt obligations.

• It is calculated by dividing the company's net operating income by its total debt service.

• A DSCR of 1 or higher indicates that the company is generating enough income to cover its debt obligations.

• Lenders typically require a minimum DSCR of 1.25 to 1.5 before approving a loan.

• For example, if a company has a net operating income of $100,000 and ...read more