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Finance
Q:
Credit is extended to a company up to one year to purchase raw materials and cover a seasonal peak need for cash. What type of loan is this?
A) Self-liquidating inventory loan
B) Working capital loan
C) Security dealer financing
D) Revolving line of credit
E) None of the above
Q:
A government security dealer requires credit to add new government securities to his security portfolio. What type of loan is this?
A) Self-liquidating inventory loan
B) Working capital loan
C) Security dealer financing
D) Revolving line of credit
E) None of the above
Q:
A bank wants to examine whether the borrower can raise cash in a timely fashion to pay bills that are coming due. This bank would most likely examine which of the following categories of ratios?
A) Customer's Control over Expenses
B) Customer's Liquidity
C) Customer's Operating Efficiency
D) Customer's Profitability
E) None of the Above
Q:
A bank that wants to examine the liquidity of a borrower would most likely examine which of the following ratios?
A) Costs of Goods Sold/ Average inventory
B) Income Before Interest and Taxes/ Interest Payments
C) Cost of Goods Sold/ Net Sales
D) Current Assets/ Current Liabilities
E) All of the Above
Q:
A bank that wants to examine the operating efficiency of a borrower would most likely examine which of the following ratios?
A) Cost of Goods Sold/ Average Inventory
B) Income Before Interest and Taxes/ Interest Payments
C) Cost of Goods Sold/ Net Sales
D) Current Assets/ Current Liabilities
E) All of the Above
Q:
Under court interpretation of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 lenders may be liable for clean-up costs of hazardous substances if:
A) The lender in involved in managing property with hazardous wastes
B) The lender has a strong association with the property owner
C) The lender has managed its customer's firms and there are toxic wastes involved
D) All of the above
E) None of the above
Q:
Term loans normally are secured by:
A) Fixed assets
B) Accounts receivable
C) Inventories
D) Personal property
E) None of the above.
Q:
Recent federal guidelines put in place by the Federal Deposit Insurance Corporation require banks to develop written procedures to protect against loss from environmental damage. These procedures are known as the:
A) Lender Protection Program
B) Environmental Risk Assessment Program
C) Lender Liability Security Program
D) Environmental Pollution Control Program
E) None of the above.
Q:
When analyzing the financial statements of a business, a credit analyst will look for ratios in which of the following categories:
A) Profitability.
B) Coverage
C) Efficiency
D) Liquidity
E) All of the above are categories of ratios bankers will look for
Q:
The most common sources that lenders look to for repayment of business loans include all of the following except:
A) The borrower's cash flow
B) Assets pledged as collateral
C) Relatives of the borrowe.
D) The borrowers net worth
E) None of the above
Q:
Banks oftentimes bid on the opportunity to finance the entire inventory of an automobile dealer through a ___________ arrangement.
A) Factoring
B) Floorplanning
C) Project loan
D) Revolving line of credit
E) None of the above
Q:
When analyzing a commercial loan credit request, which of the following statements is (are) correct?
A) The lender should evaluate the potential income available to service the loan.
B) The lender should evaluate the potential cash flow available to service the loan.
C) The lender should be certain that the loan is adequate to meet the needs of the borrower.
D) A and B
E) B and C
Q:
A credit agreement in which a business customer may borrow up to a pre-specified limit, repay all or a portion of the borrowing, and reborrow as necessary until the credit line matures is known as a (an):
A) Interim construction
B) Project loan
C) Working-capital loan
D) Revolving line of credit
E) None of the above
Q:
A loan whose principal is not due to be paid back until the loan's term ends and in which only interest is paid periodically during the life of the loan is called a (or an):
A) Working capital loan
B) Project loan
C) Bullet loan
D) Interim construction loan
E) None of the above
Q:
Business loans designed to fund long- and medium-term business investments, such as the purchase of equipment or the construction of physical facilities, covering a period longer than one year are known as:
A) Working capital loans
B) Term loans
C) Interim construction financing
D) Durable goods loan
E) None of the above
Q:
Short-term lending to support the construction of homes, apartments, office buildings, shopping centers, and other permanent structures is known as a (or an):
A) Self-liquidating
B) Working capital loan
C) Interim construction loan
D) Asset-based loan
E) None of the above
Q:
A firms balance sheet and income statement expressed as a percentage of total assets or total sales are often called .
Q:
The most risky of all business loans are . This is credit to finance the construction of fixed assets designed to generate a flow or revenue in future periods. This can include financing a new oil refinery or power plant or other similar fixed assets.
Q:
The apparent size bias in the financial marketplace led to the creation of the in the 1950s to guarantee loans made to small businesses by private lending institutions.
Q:
One of the most aggressive competitors with banks today are . Examples include GMAC, Ford Motor Credit and GE Capital.
Q:
support installment purchases of automobiles, home appliances, furniture, business equipment and other durable goods by financing the receivables that dealers take on when they write installment contracts to cover customer purchases.
Q:
provide businesses with short-term credit lasting from a few days to about one year. These loans come close to self-liquidating loans.
Q:
loans represent the earliest form of lending that banks have carried out in their more than 2000 year history.
Q:
With the advent of inflation and more volatile interest rates gave rise to a(n) , tied to changes in important money market interest rates such as the 90 day commercial paper rate.
Q:
The is the rate considered to the most common base rate figure announced by the majority of the 25 largest banks that publish their prime rates regularly.
Q:
An interest rate most widely used to price loans extended by banks operating in the U.S. is _________.
Q:
Weak loans considered to be substandard or doubtful in quality are also known as __________ credits.
Q:
A proposed loan is acceptable when the net rate of return from a customer profitability analysis is______________________ .
Q:
In the price leadership model, the amount above the price rate is often called the _____________.
Q:
_____________________________is the base of the cost-plus loan pricing model.
Q:
______________________ is the average deposit balance by the customer minus the average float adjusted for reserve requirements.
Q:
_____________________ is the rate on short-term Eurocurrency deposits which range in maturity from a few days to a few months.
Q:
The______________________ is the interest rate charged the bank's most creditworthy customers on short-term working capital loans.
Q:
____________________________________________ is a way to price loans which starts with the costs of making a loan and adds to it a risk premium for default risk and a desired profit margin.
Q:
Wages and salaries to net sales, overhead expenses to net sales and cost of goods sold to net sales are all measures of ____________________________________________.
Q:
______________________ refers to the borrowers' use of debt in their firm.
Q:
____________________________________________ are the ultimate standard of performance in a market oriented economy. These measure the net income that remains for owners after all expenses have been charged against revenues.
Q:
The borrower's______________________ reflects his or her ability to raise cash in a timely fashion at a reasonable cost.
Q:
______________________ refers to the protection afforded creditors of a firm based on the amount of the firm's earnings.
Q:
______________________ examines how effectively assets are being utilized to generate sales and how efficiently sales are converted into cash.
Q:
______________________ are designed to fund long- and medium-term investments such as the purchase of equipment. Money is borrowed in one lump sum and repayments are generally made in installments.
Q:
____________________________________________ are potential claims against the borrower which do not show up on the borrower's balance sheet. One new form of this is due to environmental damage by the borrower.
Q:
When the title to accounts receivables pledged in an asset based loan is passed to the lender and the lender takes some of the responsibility for collecting the accounts receivables this is called _____________________.
Q:
Working capital loans often require ______________________. These are required deposits in the bank by the borrower whose size is dependent on the size of the credit line.
Q:
A lender reviews the partnership agreement of one of its small business customers. Which of the 6 Cs of lending would this piece of information belong to?
A) Character
B) Capacity
C) Cash
D) Collateral
E) Conditions
Q:
Which of the following should be part of the written loan policy?
A) Lending authority of each loan officer and loan committee
B) Lines of responsibility for finding and reporting information within the loan department
C) A statement of quality standards for all loans
D) A statement for the preferred upper limit for total loans outstanding
E) All of the above should be part of the written loan policy
Q:
Which of the following is a sign of a potential loan problem?
A) Timely receipt of financial statements from the company with a loan
B) Increases in the stock price of the company that has a loan
C) Increases in earnings for each of the last three years of a company
D) Changes in the methods used to account for inventory, depreciation and other items
E) All of the above are signs of problems with the loan
Q:
The process of resolving a troubled loan so the lender can recover its funds is called the:
A) Loan Review
B) Written Loan Policy
C) Loan Workout
D) Loan Commitment Agreement
E) None of the above
Q:
A bank that primarily makes its loans to individuals, families and small businesses is:
A) A retail bank
B) A wholesale lender
C) A money center bank
D) A money market bank
E) None of the above
Q:
The TRC Company is required by its bank to pay no dividend over $3 per share. What is this?
A) An affirmative covenant
B) A negative covenant
C) A Special covenant
D) A horizontal covenant
E) None of the above
Q:
The loan officer of Second National Bank of Laramie decides to review the insurance coverage of one of its business customers. Which of the 6 Cs of lending would this piece of information belong to?
A) Character
B) Capacity
C) Cash
D) Collateral
E) Conditions
Q:
First National Bank of Edmond asks a prospective customer for her drivers license. Which of the 6 Cs of lending would this piece of information belong to?
A) Character
B) Capacity
C) Cash
D) Collateral
E) Conditions
Q:
Sean Carter has an excellent credit rating. Which of the 6 Cs of lending would this piece of information belong to?
A) Character
B) Capacity
C) Cash
D) Collateral
E) Conditions
Q:
A lender that makes a loan to an individual whose only income is commission based and who hasnt made a sale in six weeks may be violating which of the 6 Cs of lending?
A) Character
B) Capacity
C) Cash
D) Control
E) Collateral
Q:
The lender's secondary source of repayment in case of default is:
A) Capacity.
B) Collateral.
C) Character.
D) Capital.
E) Credit.
Q:
A loan to a local business to purchase a new machine would be categorized as:
A) A consumer loan
B) An agriculture loan
C) A commercial and industrial loan
D) A real estate loan
E) None of the above
Q:
Which of the following is a factor in determining the mix of loans that a bank has?
A) The location of the bank
B) The size of the bank
C) The written loan policy of the bank
D) The experience and expertise of the management
E) All of the above are factors in determining the mix of loans
Q:
A lender that makes a loan that violates its written loan policy would be violating which of the 6 Cs of lending?
A) Character
B) Capacity
C) Cash
D) Control
E) Collateral
Q:
A lender that makes a loan to a minor would be violating which of the 6 Cs of lending?
A) Character
B) Capacity
C) Cash
D) Control
E) Collateral
Q:
Loans granted to businesses to cover such expenses as purchasing inventories, paying taxes, and meeting payrolls are known as:
A) Commercial and industrial loans
B) Agricultural loans
C) Real estate loans
D) Loans to individuals
E) None of the above.
Q:
Loans extended to farm and ranch operations to assist in planting and harvesting crops and to support the feeding and care of livestock are known as:
A) Real estate loans
B) Commercial and industrial loans
C) Land loans
D) Agricultural loans
E) None of the above.
Q:
Loans providing credit to finance the purchase of automobiles, mobile homes, appliances, and other retail goods to repair and modernize homes are classified under the category:
A) Financial institution loans
B) Commercial industrial
C) Loans to individuals
D) Miscellaneous loans
E) None of the above
Q:
The most costly type of loan to make (measured by the cost per dollar of loan) for a bank is usually:
A) Real estate loans
B) Agricultural loans
C) Commercial and industrial loans
D) Loans to financial institutions
E) None of the above.
Q:
The loan category experiencing the largest losses (loan defaults) is usually:
A) Credit card loans
B) Real estate loans
C) Agricultural loans
D) Commercial and industrial loans
E) None of the above
Q:
Loans to finance one-to-four family homes fall under which loan category?
A) Commercial and industrial loans
B) Real estate loans
C) Loans to individuals
D) Single-payment loans
E) None of the above.
Q:
Real estate loans made by national banks in the U.S. cannot exceed:
A) 15 percent of a national banks total assets or 25 percent of its total capital.
B) A national banks total capital and surplus or 70 percent of time and savings deposits, whichever is greater.
C) 20 percent of a national banks capital and surplus or 80 percent of its savings deposits, whichever is smaller in amount.
D) 25 percent of capital or 10 percent of the core deposits of a national bank, whichever gives the largest amount.
E) None of the above.
Q:
In the United States national banks cannot extend an unsecured loan to a single borrower that exceeds of a national banks capital and surplus. The correct figure that fills in the blank in the preceding sentence is:
A) 25 percent
B) 10 percent
C) 15 percent
D) 20 percent
E) None of the above
Q:
The vast majority of FDIC-insured institutions are classified as:
A) Credit card banks
B) Agricultural banks
C) Consumer lenders
D) Commercial lenders
E) Mortgage lenders
Q:
Banks that emphasize lending to commercial customers are labeled:
A) Wholesale banks
B) Retail banks
C) Personal banks
D) Nonbank banks
E) Regional banks
Q:
According to the textbook the largest category (by dollar volume) of loans extended by U.S. banks is:
A) Real estate loans
B) Financial institutions
C) Agricultural loans
D) Commercial and industrial loans
E) None of the above
Q:
Loans extended to finance the purchase of automobiles, mobile homes, home appliances, and vacations are classified as:
A) Real estate loans
B) Financial institutions
C) Agricultural loans
D) Commercial and industrial loans
E) None of the above
Q:
The principal economic function of banks is to:
A) Take deposits
B) Make loans
C) Sell financial services
D) Encourage spending
E) None of the above
Q:
Factors such as changes in the economy, natural disasters, and regulation are referred to as __________ factors, while management errors, illegal manipulation, and ineffective lending policies are considered ___________ factors.
Q:
In the mortgage environment of the early 2000s, lenders were encouraged to sell individual loans and packages of loans to buy more liquid securities instead, thus shifting much of the risk of lending to capital markets. This process is referred to as __________________.
Q:
One problem with the newer lending model called _________________ was found to at least partially contribute to the recent crisis in the mortgage market.
Q:
One of the most widely consulted sources of data on business firms is which was founded in Philadelphia in 1914 to exchange credit information among business lending institutions and to organize conferences and publish educational materials to train loan officers and credit analysts.
Q:
One part of the 6 Cs of lending is which looks at whether the borrower has a well-defined purpose for the loan and a serious intent to repay the loan.
Q:
One aspect of the CAMELS rating system is which looks at the quality of the banks loans. Examiners look at all loans over a certain size and a random selection of all other loans when looking at this aspect of a bank.
Q:
Under the no individual can be denied credit because of race, sex, religious affiliation, age or receipt of public assistance.
Q:
Smaller banks tend to emphasize in the form of smaller denomination personal cash loans and home mortgage loans to extended to individuals and families as well as smaller business loans.