CEC Certification Exam 2022 with complete solution. Rated A, LATEST UPDATE

CEC Certification Exam 2022 with complete solution Your manager has asked you to prepare an analysis for a borrowing request at Your Bank. Which of the following tasks are you most likely to complete first? a. Prepare ...

CEC Certification Exam 2022 with complete solution Your manager has asked you to prepare an analysis for a borrowing request at Your Bank. Which of the following tasks are you most likely to complete first? a. Prepare a term sheet b. Create a projection c. Analyze the company's available collateral d. Evaluate the company's business strategy -Answer- D You are calling for the first time on the owner of a successful local business that currently banks with another bank in your market. You are very interested in developing a banking relationship with the business and its owner. Which of the following goals will be most important to achieve in the initial meeting? a. Obtain a commitment from the owner to open a checking account at your bank. b. Offer a term sheet outlining a loan at a competitive rate. c. Learn about the owner's business and personal objectives. d. Gather the most recent financial statements on the business. -Answer- C Gruper Home Appliances, Inc., a manufacturer of kitchen appliances, sells 70% of its goods to X-Mart, a large national retailer of consumer durables. Which of the following best describes the reason why Gruper has a low degree of bargaining power with XMart? a. There are no substitutes for the product b. The suppliers have high variable costs c. Customers have brand loyalty d. Sales are concentrated with a large volume buyer -Answer- D The NBER has released a report that suggests the economy is showing signs that it is moving into early contraction. You review your current portfolio to develop a list of customers that are likely to fare best through this cycle. Which of the following would be included on your list? a. A plumbing supplies distributor b. A local high fashion retailer c. A manufacturer of auto engines d. A local accounting firm -Answer- D You are preparing to meet with the owner of Style-For-Less, a successful retailer of apparel geared to young professionals. The owner has obtained and outfitted a second location in a high-traffic retail mall in preparation for its planned opening and has asked to meet with you to discuss a possible financing need. Based on the industry, you think the owner will most likely have a need for: a. A commercial mortgage to purchase the new location b. A lease to fund the acquisition of store fixtures c. A line of credit to purchase inventory for the upcoming season d. A term loan to purchase a point-of-sale system -Answer- CParsons and Associates is a highly-regarded business financial advisory firm located in a downtown office building that was founded thirty-five years ago by Grant Parsons. Your bank has a long-term relationship with both the business and its founder. You recently saw Grant Parsons at a bank-sponsored economic outlook forum and he suggested you stop by his office to discuss some potential opportunity. Based on the type of company and life cycle stage, which of the following do you think is the most likely opportunity to be discussed? a. A mortgage to fund the purchase a new building. b. A line of credit to fund a seasonal buildup in receivables. c. A term loan to fund the buyout of his interest by his partners. d. A new loan to refinance his home mortgage. -Answer- C [The Conference Board announced today that interest rates remain low. Reports indicate that companies are holding lower inventories and capital expenditures have decreased. The availability of credit continues to be tight.] Based on the above report, which of the following best describes the current stage in the general business cycle? a. Early expansion b. Late expansion c. Early contraction d. Late contraction -Answer- D The economy is entering the late contraction stage of the business cycle. Your Bank has four customers requesting an increase to their lines of credit. Assuming their overall creditworthiness is comparable, which of the following customers would exhibit the least risk to the Bank? a. A wholesaler of floor coverings b. An upscale children's clothing boutique c. A beer and soda distributor d. A temporary staffing firm -Answer- C In which industry lifecycle stage would companies be most likely to focus on cost discipline? a. Introductory b. Growth c. Mature d. Decline -Answer- D In which company lifecycle stages is a company most likely to be profitable? a. Introductory and growth b. Growth and mature c. Mature and declining d. Introductory and declining -Answer- B In which company lifecycle stage is a company most likely to invest in equipment that adds efficiency? a. Introductoryb. Growth c. Mature d. Declining -Answer- C Which of the following statements best describes the relationship between product and industry lifecycle stages? a. A product's lifecycle stage by definition coincides with its industry's lifecycle stage. b. Product lifecycle stages generally lag their industry by one stage. c. Product lifecycle stages generally lead their industry by one stage. d. Individual products can be variable in their lifecycle timing compared to the overall industry stage -Answer- D Clara's Costumes is a retailer of costumes, primarily purchased for Halloween. Which of the following characteristics would most likely be present in Clara's financial statements? a. Inventory will increase immediately following the seasonal peak b. The need for credit will be lowest during the high point in the operating cycle c. Receivables will increase after the increase in inventories d. Fixed asset spending will be highest at the seasonal peak -Answer- C GCC ,Inc. is a local firm that provides general contracting services to commercial real estate developers operating in your region. In assessing the sustainability of the company's revenues, which of the following questions would be least relevant to ask? a. What is your current backlog of contracts? b. How many developers do you work with? c. What is the outlook for the economy in the region? d. How much did your sales grow last year? -Answer- D Collective Arts and Crafts is a retailer that features the work of many local artisans. In developing questions to learn about the company's expense structure, which of the following would be most relevant to ask? a. Is any of your inventory sold on consignment? b. How many suppliers do you have? c. How is your sales staff compensated? d. Do you own your retail location? -Answer- A Which of the following would be considered a variable cost? a. The cost of property & casualty insurance b. Salary paid to the chief financial officer c. Rent on the production and office facilities d. Wages paid to customer service representatives -Answer- D Six months ago a high fashion retailer opened an outlet store to sell out-of-season goods left over from its main location. A review of the retailer's current year results compared to prior years is likely to show which of the following results? a. Lower sales growthb. Higher operating margin c. A lower gross profit margin d. Higher income tax rate -Answer- C Weatherproof Windows is a manufacturer of replacement windows for residential use. The company reports fixed asset turnover ratios as follows for the last four years: [Year 1: 5.4x Year 2: 6.0x Year 3: 6.2x Year 4: 1.45x] Which statement is the most logical reason for the change in turnover seen in Year 4? a. The company's sales grew sharply in Year 4. b. The company opened a new plant in Year 4. c. The company changed its sales mix in Year 4. d. The company sold some of its delivery trucks in Year 4. -Answer- B As the credit analyst of Your Bank, you have been asked to assess the liquidity of Burgess Corporation, a distributor of office supplies. Which of the following measures would provide the most accurate measure of liquidity? a. Net working capital b. Quick ratio c. Current ratio d. Working capital/sales -Answer- B A distributor of office equipment has experienced moderate sales growth in each of the last three years while gross and operating profit margins have remained stable. Each year the company has shown a declining amount of cash after operations. What is the most logical cause of the declining cash after operations? a. Higher dividend and interest payments b. Increasing reliance on trade creditors c. Less efficient inventory management d. Acquisition of new capital equipment -Answer- C Using the information below, which statement best describes how ABC met its predominant financing need?a. ABC's operating cash flow was sufficient to cover its investing activities. b. ABC needed to use short-term debt to support the growth in receivables and inventory. c. ABC's capital expenditures were funded mostly by long-term debt. d. ABC used short-term debt to cover a portion of its interest expense. -Answer- C During a recent meeting with Your Bank's loan committee, you were asked to determine why Clear Lights, a manufacturer of lights used in office buildings, requested financing. It was stated that the company had positive cash after debt amortization. What then would be the cause of the financing request? a. Operating expenses b. Dividend payments c. Interest expense d. Capital expenditures -Answer- DWhich of the following events would create a cash inflow in a direct cash flow statement? a) Sales growth with stable margins. b) Longer customer payment terms. c) Slower payment of trade creditors. d) Pay off existing bank debt. -Answer- C If a company has negative net cash income, which of the following observations is true? a) The company did not generate enough cash flow from sales to cover cash production costs. b) The company did not generate enough net cash after operations to cover interest and dividends. c) The company did not generate enough cash after operations to pay its taxes. d) The company did not generate enough cash profits to cover its cash operating expenses. -Answer- B A company with current-year sales of $4,500,000 and cost of goods sold of $3,248,000 reduced its inventory days from 119 days in the prior year to 115 days for the current year. Its receivable days slowed from 40 days to 43 days. What was the cash flow effect of these swing-factor efficiency changes? a) No cash flow effect b) ($1,000) c) $9,000 d) $12,000 -Answer- B A company's accounts payable days have increased from 14 to 37. Which of the following explanations suggests the least appropriate management decision from the bank's perspective that lead to this change? a) Management decided to stock commonly purchased items formerly sold as specialorder merchandise. They relinquished some trade discounts by extending payments to suppliers to finance the inventory. The net effect on cash flow was a small increase in net cash after operations. b) Management purchased extra inventory, at a very attractive price, from a supplier left with excess stock after its own largest customer canceled an order. The supplier agreed to extend terms for the purchase. The net effect on cash flow was a slight decrease in net cash after operations. c) Management used supplier credit to reduce its bank line of credit, so it could meet a debt service coverage covenant on a term loan. Relinquished supplier discounts offset the saved interest expense. The net effect on cash flow was a significant increase in net cash after operations. d) Management extended its supplier payments to manage cash flow during very slow seasonal sales caused by unusually harsh weather conditions. Inventory days have increased, and the company relinquished supplier discounts. The net effect on cash flow was a small decrease in net cash after operations. -Answer- CCheap Stuff, Ltd. is a distributor of goods to discount stores. The company has experienced 12% sales growth over the last three years. Despite continued economic declines projected, the company is forecasting continued sales growth of 10-15% each year over the next 3 years. Which of the following sources of financing would be most appropriate to support related increases in receivables and inventory? a. Demand note b. Seasonal line of credit c. Bridge loan d. Revolving line of credit -Answer- D Which of the following sources of information is least critical when developing a set of projections? A. past operating results of the company B. management reports including business plan, strategic objectives, mission statements, management and forecast C. industry and economic reports D. organizational charts and job descriptions -Answer- D Which of the following best describes the order in which a manual projection is constructed? A. The amount of existing and new debt is determined to project interest and principal payments. B. Capital expenditures and working capital needs are forecast to estimate total borrowing needs. C. The income statement is constructed before calculating the swing factors and other elements on the balance sheet. D. Net income and dividends are projected to determine retained earnings and total net worth on the balance sheet. -Answer- C FAR Corporation imports high quality chocolate, distributing to large regional candy makers as the primary ingredient in their branded chocolate confections. The company purchases from five sources. Two of the sources are in a country that recently erupted into what is believed will be lengthy and violent political turmoil. High quality chocolate is now in short supply, and FAR has been unable to secure acceptably priced replacement suppliers for about 23% of its needs, because the world's candy and food giants have pre-existing contingency contracts that guarantee access to chocolate during a serious supply disruption. FAR does not have comparable contingency arrangements. Assume you are developing a financial projection for the next twelve months. To date, FAR has been very profitable and has very posit