CLFP Credit Process And Financial Statement Practice Exam

Global cash flow assessment should include which parties?

Guarantor and lessee Only the lessee Only the guarantor None

Correct Answer:

Guarantor and lessee

Explanation:

Global cash flow assessment looks at every source that can provide payment to the lessor over the life of the lease. The lessee is the primary payer, but if there’s a guarantor—such as a parent company or bank guaranteeing the lease—the guarantor’s obligation can be called upon to meet payments if the lessee can’t. Including both parties gives a complete picture of cash-flow certainty and credit risk, which is essential for evaluating the transaction’s viability and how it should be priced. Relying only on the lessee ignores potential backup payments; relying only on the guarantor ignores the actual payment stream and the conditions under which the guarantor would step in. Therefore, both are included.

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