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AIWMI Exam CCRA-L2 Topic 2 Question 61 Discussion

Actual exam question for AIWMI's CCRA-L2 exam
Question #: 61
Topic #: 2
[All CCRA-L2 Questions]

''Following four entities operate in the Indian IT and BPO space. They all are into same segment of providing off-shore analytical services. They all operate on the labour cost-arbitrage in India and the countries of their clients. Following information pertains for the year ended March 31, 2013.

The year FY13, was typically a good year for Indian IT companies. For FY14, the economic analysts have

given following predictions about the IT Industry:

A) It is expected that INR will appreciate sharply against other USD.

B) Given high inflation and attrition in IT Industry in India, the wages of IT sector employees will increase more

sharply than Inflation and general wage rise in country.C) US Congress will be passing a bill which restricts the outsourcing to third world countries like India.

While analyzing the four entities, you come across following findings related to Glowing:

Glowing is promoted by Mr.M R Bhutta, who has earlier promoted two other business ventures, He started

with ABC Entertainment Ltd in 1996 and was promoter and MD of the company. ABC was a listed entity and

its share price had sharp movements at the time of stock market scam in late 1990s. In 1999, Mr. Bhutta sold his entire stake and resigned from the post of MD. The stock price declined by about 90% in coming days and has never recovered. Later on in 2003, Mr. Bhutta again promoted a new business, Klear Publications Ltd (KCL) an in the business of magazine publication. The entity had come out with a successful IPO and raised money from public. Thereafter it ran into troubles and reported losses. In 2009, Mr. Bhutta went on to exit this business as well by selling stake to other promoter(s). There have been reports in both instances with allegations that promoters have siphoned off money from listed entities to other group entities, however, nothing has been proved in any court.''

Based on your findings in the case of Glowing, how will you handle the same as a credit rating analyst:

Show Suggested Answer Hide Answer
Suggested Answer: D

Contribute your Thoughts:

Yvonne
1 days ago
With a promoter like that, I bet Glowing's financial statements are about as transparent as a brick wall. Better bring a flashlight and a magnifying glass to this one!
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Alva
2 days ago
Well, you can't judge a book by its cover, right? Let's focus on the facts and see if Glowing's current operations are on the up-and-up. As long as the corporate governance checks out, I don't see why we can't give them a fair chance.
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Raymon
13 days ago
Sounds like the promoter has a knack for making money... disappear. I'll have to keep a close eye on the books and make sure nothing fishy is going on. Can't be too careful with this one!
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Salome
4 days ago
A) Be more cautious and skeptical on any information received from Glowing and give negative marks in management risk and use it as an overriding factor to lower the credit ratings.
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Dominque
21 days ago
Hmm, a promoter with a shady past like that? I'd rather not touch this one with a ten-foot pole. Better to just deny the assignment and avoid the headache.
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Ernest
3 days ago
I agree, it's better to steer clear of any potential trouble. Denying the assignment seems like the safest option.
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Wenona
22 days ago
I'm definitely going to play it safe with Glowing. Those past red flags are too much of a risk to ignore. I'll have to be extremely thorough and skeptical in my analysis.
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Kenneth
1 months ago
I believe option A is the best approach to handle Glowing as a credit rating analyst.
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Marti
1 months ago
I agree, we should definitely consider the management risk before giving credit ratings.
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Tenesha
1 months ago
I think we should be cautious with Glowing due to the past history of the promoter.
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