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// EXAM HALL25 QUESTIONS · 30 MINUTES

Credit Analyst Practice Test

Work the numbers, read a whole file, and say what you would recommend.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A credit analyst practice test asks you to do the work of the seat under time: calculate cover and leverage, read a borrower's three years of accounts, find what the numbers hide, and make a recommendation. This paper has three parts: the numbers, a whole file set on one exhibit, and the calls a desk makes. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock with the reads held to the end, or take it as practice; each option then shows how far it sits from a senior banker's read.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// HOW TO SIT IT

Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.

PART A

The numbers

Sums a credit analyst is expected to do without looking them up. Work each one before you look at the options.

PART A · QUESTION 1

A company asks to refinance. Its year in four numbers:

EBITDA
US$6m
Capex + tax
US$2m
Interest
US$1m
Principal due
US$2m

What is its debt service cover, on cash available after capital spending and tax?

PART A · QUESTION 2

A distributor's year, in four numbers:

Operating cash flow
US$4.0m
Maintenance capex
US$1.5m
Growth capex
US$2.0m
Dividends
US$1.0m

How much cash does it generate after keeping its assets in shape, before growth and dividends?

PART A · QUESTION 3

A distributor's reported EBITDA is US$5.1m. The CFO's bridge adds back three items.

Reported EBITDA
US$5.1m
Restructuring
US$0.9m · third year running
Legal settlement
US$0.3m · first in ten years
Owner's pay above market
US$0.2m

What EBITDA do you lend against?

PART A · QUESTION 4

A retailer's accounts keep its store leases off the balance sheet. Its banker restates them as if the leases were capitalised.

Net debt, as reported
US$6m
EBITDA, as reported
US$4m
Lease liability if capitalised
US$15m
Annual rent inside operating costs
US$3m

What is net debt to EBITDA with the leases on the balance sheet?

PART A · QUESTION 5

A US$10m loan. The bank estimates a 2% chance the borrower defaults within a year, and expects to lose 40% of what is owed if it does.

What is the expected annual loss?

PART A · QUESTION 6

A bank lent 65% of the value of a factory valued at US$10m. If it has to sell, it expects a forced-sale discount of 30%, and selling costs of 5% of the sale price.

What does it recover against the US$6.5m loan?

PART A · QUESTION 7

A supplier offers its customers 2% off for paying in 10 days instead of 40.

Roughly what annual rate is the supplier paying to be paid early?

PART B

The file

One borrower, ten questions. Read the exhibit first, and read it in a lender's order.

EXHIBIT A · THE BORROWER

A family-owned maker of stainless-steel equipment for commercial kitchens. Figures in US$000.

It asks to raise its revolving line from US$4.0m to US$6.0m “to fund growth”. It has never missed a payment, and every covenant passes.

Income statement
Year 1Year 2Year 3
Revenue20,00023,00027,000
Cost of sales14,00016,33019,710
Gross profit6,0006,6707,290
Overheads3,8004,2704,890
EBITDA2,2002,4002,400
Depreciation500550600
Interest300360480
Tax392417370
Net profit1,0081,073950
Balance sheet at year end
Year 1Year 2Year 3
Debtors3,3004,4006,200
Stock2,3003,1004,500
Fixed assets4,0004,0504,150
Creditors1,7002,1002,900
Revolving line (limit 4,000)3501,6273,977
Term loan3,0002,5002,000
Equity4,5505,3235,973
Other cash movements
Year 2Year 3
Capital expenditure600700
Dividend300300
Term loan repaid500500

No cash balance at any year end. Debtor days are on revenue; stock and creditor days on cost of sales. An aged debtors list and a stock list have been asked for.

PART B · QUESTION 8

From Exhibit A, Year 3.

What are debtor days, on revenue?

BACK TO EXHIBIT A ↑
PART B · QUESTION 9

From Exhibit A, Year 3: debtor days 84, stock days 83, creditor days 54.

What is the cash conversion cycle?

BACK TO EXHIBIT A ↑
PART B · QUESTION 10

From Exhibit A, Year 3.

What is operating cash flow, after interest and tax?

BACK TO EXHIBIT A ↑
PART B · QUESTION 11

From Exhibit A, Year 3.

What is net debt to EBITDA?

BACK TO EXHIBIT A ↑
PART B · QUESTION 12

From Exhibit A, Year 3. Take cash available for debt service as EBITDA less tax and capital expenditure.

What is debt service cover?

BACK TO EXHIBIT A ↑
PART B · QUESTION 13

From Exhibit A: debt service cover is 1.4 times on paper, yet operating cash flow in Year 3 was minus 850.

What actually paid the debt service?

BACK TO EXHIBIT A ↑
PART B · QUESTION 14

From Exhibit A: revenue up 35% in two years, gross margin down from 30% to 27%, debtor days up from 60 to 84, stock days up from 60 to 83.

What does the pattern suggest first?

BACK TO EXHIBIT A ↑
PART B · QUESTION 15

From Exhibit A: you have thirty minutes with the finance director before you write your paper.

Which question do you put first?

BACK TO EXHIBIT A ↑
PART B · QUESTION 16

From Exhibit A. Suppose the line became a borrowing base: 80% of debtors under 90 days plus 50% of moving stock. Of debtors of 6,200, 1,700 are over 90 days. Of stock of 4,500, 1,500 is slow.

How much could the bank lend against?

BACK TO EXHIBIT A ↑
PART B · QUESTION 17

From Exhibit A: the borrower wants the line raised to US$6.0m to fund growth. It is profitable, has never missed a payment, and every covenant passes.

What do you recommend?

BACK TO EXHIBIT A ↑

PART C

The calls

Situations from the desk, each with a decision in it.

PART C · QUESTION 18

A seasonal toy importer asks for a five-year US$2m term loan 'for working capital'. Its stock peaks every October and is gone by January.

What is your first response?

PART C · QUESTION 19

A services company's profit has risen four years running. Its operating cash flow, as a share of net profit, has gone 110%, 95%, 78%, 61%.

What do you read first?

PART C · QUESTION 20

Profit is up. Debtor days have lengthened three years running. The notes have quietly dropped a sentence about 'conservative provisioning'. The audit opinion is clean.

Which do you believe?

PART C · QUESTION 21

A manufacturer reports net profit of US$3.0m and operating cash flow of US$5.5m. In the same year its payables days went from 45 to 80.

What do you make of the strong cash flow?

PART C · QUESTION 22

A borrower's revenue is up 6%, in line with plan. Its receivables are up 24%. Both sit inside every limit the covenants set.

Signal or noise?

PART C · QUESTION 23

Two US$3m requests land the same morning. One borrower's cash flow covers the debt comfortably, but the only security is stock. The other offers a first mortgage over land worth twice the loan, with cash flow that barely covers the interest.

Which file is stronger?

PART C · QUESTION 24

A wine exporter's June balance sheet shows stock at a high and cash at a low. A colleague's draft paper says 'liquidity deteriorating'.

Before you sign it off, what do you ask?

PART C · QUESTION 25

Writing a credit paper for a client you want to win, you find a covenant breach at its previous bank that the client did not mention.

Your move?

0 OF 25 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE

// THE REST OF THE ROUND

Every question here is original; none is any bank's real test. Written for: Credit analyst, Credit sanctioner, Portfolio manager, Workout and recoveries manager, Lending operations officer.