London Institute of Banking & Finance (LIBF) Qualifications Certificate in Business Banking and Conduct of Business Syllabus

Certificate in Business Banking and Conduct of Business syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Certificate in Business Banking and Conduct of Business in London Institute of Banking & Finance (LIBF) Qualifications, not a summary of it.

1. 1

   Business Customers and Their Needs

   4 topics

   • Types of business entity
     • Sole traders and partnerships
     • Limited companies and LLPs
   • Business life cycle and finance needs
     • Start-up, growth and maturity stages
   • Understanding business cash flow
     • Working capital management
   • Assessing business financial statements
2. 2

   Business Lending and Finance

   4 topics

   • Forms of business finance
     • Overdrafts and term loans
     • Asset finance and invoice finance
     • Commercial mortgages
   • Credit assessment for businesses
     • The lending canons and CAMPARI
     • Security and guarantees
   • Government-backed lending schemes
   • Managing problem business debt
3. 3

   Regulation and Conduct in Business Banking

   4 topics

   • Regulated versus unregulated business activity
     • Micro-enterprise protections
   • Treating business customers fairly
   • Financial crime in commercial banking
     • Enhanced due diligence for businesses
   • Standards of Lending Practice for business customers

Certificate in Business Banking and Conduct of Business flashcards for London Institute of Banking & Finance (LIBF) Qualifications

18 of 51 cards from the Certificate in Business Banking and Conduct of Business deck — real questions with worked answers.

1. What is a sole trader, and what is the key liability characteristic of this business entity?

   A sole trader is an unincorporated business owned and run by one individual. The owner has unlimited personal liability, meaning there is no legal separation between the owner and the business, so personal assets are at risk for business debts.

2. How does a partnership differ from a limited liability partnership (LLP) in terms of liability?

   In an ordinary partnership, partners share unlimited joint (and several) liability for the firm's debts. In an LLP, the partnership is a separate legal entity and each partner's liability is generally limited to their capital contribution, protecting personal assets.

3. What distinguishes a private limited company (Ltd) from a public limited company (PLC)?

   An Ltd cannot offer shares to the general public and needs no minimum share capital. A PLC can offer shares to the public, must have at least £50,000 of allotted share capital (with 25% paid up), and can be listed on a stock exchange.

4. Why is 'separate legal personality' important when banking an incorporated company?

   An incorporated company is a distinct legal person from its shareholders and directors, so it can own assets, enter contracts and borrow in its own name. Shareholders' liability is limited to unpaid share capital, which affects how the bank assesses risk and seeks security/guarantees.

5. List the typical stages of the business life cycle.

   Start-up (seed), growth, maturity (established), and decline (or renewal/exit). Each stage has different finance needs and risk profiles.

6. What type of finance is most appropriate at the start-up stage and why?

   Start-ups typically need equity or founder capital, grants, and overdraft/short-term facilities because they have no trading record, uncertain cash flow and limited security, making them high-risk for debt lenders.

7. During the growth stage, why does a business often experience cash flow strain despite rising profits?

   Rapid growth ties up cash in increased stock, work-in-progress and trade debtors (receivables) before cash is collected, a phenomenon called overtrading, so the business needs working capital finance even while profitable.

8. Define overtrading.

   Overtrading occurs when a business expands its trading volume too quickly without sufficient working capital, so it runs out of cash to meet liabilities despite being profitable on paper.

9. What is the basic definition of business cash flow, and how does it differ from profit?

   Cash flow is the actual movement of money into and out of the business over a period. Profit is an accounting measure (income minus expenses) that includes non-cash items like depreciation and credit sales, so a business can be profitable yet cash-poor.

10. What is the working capital cycle (cash conversion cycle)?

    It is the time between paying cash for inputs (stock/suppliers) and receiving cash from customers. $$\text{CCC} = \text{Inventory days} + \text{Receivables days} - \text{Payables days}$$ A longer cycle ties up more cash.

11. State the formula for inventory (stock) days.

    $$\text{Inventory days} = \frac{\text{Average inventory}}{\text{Cost of sales}} \times 365$$ It shows how long, on average, stock is held before being sold.

12. State the formula for receivables (debtor) days.

    $$\text{Receivables days} = \frac{\text{Trade receivables}}{\text{Credit sales}} \times 365$$ It measures the average time customers take to pay.

13. State the formula for payables (creditor) days.

    $$\text{Payables days} = \frac{\text{Trade payables}}{\text{Credit purchases (or cost of sales)}} \times 365$$ It measures the average time the business takes to pay suppliers.

14. What is the purpose of a cash flow forecast for a business customer?

    It projects expected cash receipts and payments over future periods to identify timing of surpluses and shortfalls, allowing the business and bank to plan facilities, test affordability and spot funding gaps before they occur.

15. Name the three main financial statements used to assess a business.

    The statement of profit or loss (income statement), the statement of financial position (balance sheet), and the statement of cash flows.

16. What does the statement of financial position (balance sheet) show, and what is its fundamental equation?

    It shows a snapshot of what a business owns and owes at a point in time. $$\text{Assets} = \text{Liabilities} + \text{Equity}$$

17. State the current ratio formula and what it measures.

    $$\text{Current ratio} = \frac{\text{Current assets}}{\text{Current liabilities}}$$ It measures short-term liquidity — the ability to meet liabilities due within a year. Around $2:1$ is often seen as comfortable.

18. State the quick (acid-test) ratio and why it is used.

    $$\text{Quick ratio} = \frac{\text{Current assets} - \text{Inventory}}{\text{Current liabilities}}$$ It excludes stock (the least liquid current asset) to give a stricter test of immediate liquidity; around $1:1$ is generally acceptable.

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