Exam Exam Latest Update

Corporate Banking Interview Actual Exam Exam Latest Update Questions and Correct Answers Rated A+

List 5 corporate banking products -answer-term loans, bridge loans, asset-based loans, revolvers, letters of credit

What is a term loan? -answer-loan a fixed amount of money the client draws on upfront and requires annual principal repayment

What is a bridge loan and when is it used? -answer-quick financing until more permanent financing is put in place, use after a bond is launched and before proceeds are raised

What is a revolver? -answer-client pays a commitment fee for access to a credit line that's drawn on as needed to meet short-term borrowing needs

What are letters of credit? -answer-written agreements where bank backs payment in case borrower defaults

What is an asset-based loan? -answer-use of inventory to ensure payment is made

Why corporate instead of investment? -answer-like how corporate is central to everything at bank, want to manage long-term client relations rather than on and off deals

What is ebitda? -answer-earnings before interest, taxes, depreciation, and amortization, proxy for recurring cash flow from the core business operations of company

• c's to determine creditworthiness of a company? -answer-character

(track record of repaying debt), capacity (debt, ebitda), capital, collateral (what lender claims if loan isn't repaid), conditions (purpose of loan)

What are maintenance covenants? -answer-relate to financial metrics that the company must maintain after it raises debt

What are incurrence covenants? -answer-relate to specific actions that a company must take or not take.

What is an upfront fee? -answer-fee paid to the banks for committing to the loan

What are the 3 financial statements? -answer-income, balance sheet, cash flow

What is the income statement? -answer-gives the company's revenue and expenses, and goes down to net income, the final line on the statement

What is the balance sheet statement? -answer-shows company's assets (cash inventory and pp&e), liabilities, and shareholder's equity, where assets=liabilities + equity

Cash flow statement -answer-begins with net income, adjusts for non- cash expenses and working capital changes, and then lists cash flow from investing and financing activities

Debt capacity -answer-amount of debt the company can take on for leverage and coverage covenants

Libor -answer-ir that international banks charge each other for overnight euro dollar loans

What is change of control clause? -answer-if the company is acquired or a new entity controls the firm, the banks can call the loans

What is a waiver? -answer-legal agreement where the parties to the contract agree to waive a condition for a certain instance

What is a positive covenant? -answer-borrower or obligor is required to continue to do something or actively do something

What is a negative covenant? -answer-restricts them from carrying out a certain action

• examples of a negative covenant? -answer-restriction on asset

sales, distributions, and merger

What are two events of default? -answer-failure to pay interest after grace period and failure to pay principal

What is the debt cushion? -answer-the debt capacity minus how much debt the company has now

What is a cash sweep? -answer-cash flow in excess of debt payments have to be used to pay down debt

Collateral -answer-what lender claims if loan isn't repaid

What is borrowing base? -answer-the amount of money that a lender is willing to loan a company, based on the value of the collateral the company pledges

If you could only choose 2/3 statements, which would they be? - answer-income statement and balance sheet, because you can create the cash flow statement from both of those

What is the balance sheet statement? -answer-shows the company's assets, as well as its liabilities - such as debt and accounts payable, and shareholders' equity

What are the 3 categories under cash flow statement? -answer-cash flow of operations, investment, financing

• things under cash flow of operations -answer-net income,

amortization, changes in assets/liabilities

• things under cash flow of investment -answer- PPE, capital

expenditures

• things under cash flow of financing -answer-debt raised/paid off,

dividends issued, shares issued/repurchased

Camels -answer-capital adequacy, assets, management capability, earnings, liquidity, sensitivity

Capital adequacy -answer-amount of capital bank is required to have by its financial regulator