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Credit Risk Analyst Interview Questions


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Goldman Sachs
New Analyst Credit Risk Management was asked...29 October 2009

Which specific balance sheet items would you look at to determine a company's credit worthiness?

3 Answers

Cash balances obviously as it shows if they have the flow to support additional lines of credit, then maybe creditors as it shows a pecking order if things go south. Less

Assets, Liabilities, and Shareholder's Equity. - Assets: Are the economic resource of the company use to operate the company include Cash, Inventory, and Equipment - Liabilities: Represent the debt of the company. - Equity: Represent the net worth of the company. Less

Not sure but I would say Current Liabilities to Cash and liquid assets, change in cash flows, growth of net total assets are three possibilities, although there are certainly more and better answers. Less

Morgan Stanley

Describe a CDS.

3 Answers

Credit Default Swap

Yes Rong, "Credit Default Swap". I was asked to describe them both technically and non-technically. Less

Credit Default Swap

J.P. Morgan

Bob Smith is looking to take a home loan with a $1,500/mo payment. He already pays $500/mo for student and auto loans. If his salary is $72,000, what percentage from his gross monthly income will be used to pay these loans?

2 Answers

Pretty easy -- 33%

Should be 33.33% to be more accurate

Morgan Stanley

An airline company is replacing their entire fleet of planes. The old planes have zero salvage value and there is no depreciation to deal with. Explain the effect on the the company's financial statements.

2 Answers

It would affect the financial statements in various ways. Liquidity ratios would change, potentially for the better even though the purchase is made with debt. If purchased with debt, leverage would increase. Then of course Times interest earned would change assuming revenue / CF match that of the old fleet. All else equal, ROE increases due to leverage. Etc. could go on forever. Less

I suppose it depends if they are paying with cash or on account. The likely position is on account, so assets increase by new fleet purchase price, liabilities increase by same amount. If cash is used, then -cash and +assets. This would have an affect on statement of cash flows - cash from investing activities. Since you cannot sell the old fleet ($0 salvage) and no depreciation is left, there is nothing you can do to write-off the old assets. No affect on financial statement regarding old fleet. Less



2 Answers

Give a close answer 40 x 40 = 1600


Northern Trust

When the data do not have enough number of defaults, how would you build a default model?

2 Answers

I threw some random silly thoughts, which might be the reason for no offer. I have worked only for data intensive companies and so haven't been exposed to such challenges. However, this company issues loans selectively to wealthy people and so their default rate is so low. Probably those with biostatistics degrees exposed to limited data environment would appear strong to them. Less

I dont know if I got the right answer, but in this case I would consider using a boostrap method to simulate this.... Less

Macquarie Group

Nothing too unusual, however they did ask 2 brainteasers during the phone interview which I didn't expect at this stage. If it takes 2 people 2 hours to build 2 bikes, how many people are needed to build 12 bikes in 6 hours?

2 Answers

2 people can build 6 bikes in 6 hours. so 4 are need to build 12 in 6 hrs

As 12 people need 12 hours to build 12 bikes, the answer is 24. I guess...

NatWest Group

10 uses of a pencil other than writing

2 Answers

i was able to come up with 6

1.)Writing 2)Book Marker 3)Rubbing 4)Hair bun holder 5)Decoration 6)sockets to hold to wire 7)to burn as a wood 7)to hit or use as a weapon 8)can be used as a accupressure tool for legs 9)Thread,wire stand Less


Différentes methodes de 'valuation' d entreprises

1 Answers

DFC Multiples Comparables


Seems like you are comfortable there, maybe you should just stay there.

1 Answers

But being comfortable may not always be a good thing you see.

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