Davidson; Management - 3rd Australasian Edition



1.
Which of the following is not characteristic of small banks compared to large banks?
A.
they have proportionally more fixed assets
B.
they have proportionally more agricultural loans
C.
they have proportionally less capital
D.
they have proportionally more deposits


2.
Loan capital is an additional source of bank funds, which has the characteristics of
A.
debt
B.
equity
C.
liquidity
D.
a and b


3.
All but one of the following is a bank asset.
A.
borrowed funds
B.
consumer loans
C.
deposits in other banks
D.
government securities


4.
Bank capital represents
A.
bank profit
B.
equity or ownership funds of a bank,
C.
commercial paper
D.
bank investments


5.
Debt issues are
A.
term loans
B.
line of credit
C.
revolving credit
D.
short and long-term instruments that raise funds from the public.


6.
Which is the ultimate goal of a commercial bank?
A.
long-term growth
B.
deposit growth
C.
bank safety
D.
long-term profit maximization


7.
Credit scoring
A.
is an objective method in analyzing a potential borrower's character.
B.
determines the credit worthiness of a potential borrower
C.
is how to determine the credit score of a potential borrower.
D.
determines the value of the loans sold to investors.


8.
Return on average assets (ROAA) is the key ratio in evaluating
A.
how well a bank is performing
B.
how efficiently a bank is using its sources of funds
C.
the quality of bank management
D.
how well the board of directors are performing.

C is correct. It tells how much profit bank management can generate with a given amount of assets. (see page 387).


9.
Investment securities are more important to the portfolios
A.
small banks
B.
large banks.
C.
bank's shareholders
D.
a and b


10.
Trusts operations are
A.
activities in which a bank acts in a fiduciary capacity for an individual or a legal entity, such as a corporation or the estate of a deceased person
B.
activities in which a bank protects the investments for an individual
C.
fee-based income for a bank
D.
activities in which a bank helps a minor to manage his or her inherited estates.


11.
Contingent assets are
A.
bank's cash balances.
B.
off-balance-sheet activities that may ultimately become on-balance-sheet assets.
C.
on-balance-sheet activities that may ultimately become off-balance-sheet assets.
D.
bank's most liquid assets.


12.
A bank expecting interest rates to rise in the future would prefer to make
A.
fixed-rate loans
B.
long-term, fixed rate loans
C.
floating-rate loans adjusted infrequently
D.
floating-rate loans adjusted frequently


13.
A line of credit is
A.
credit guranteed to a potential borrower.
B.
legal commitment on the part of the bank to make credit available to a potential borrower
C.
credit available to a potential borrower at a discount
D.
an agreement under which a bank customer can borrow up to a predetermined limit for a short term.


14.
Commerical bills are
A.
a source of fee income
B.
a nondeposit source of funds
C.
a contingent liability
D.
short-term discount facilities


15.
Trading securities are
A.
securities for investments
B.
securities for the purpose of trading or selling them to clients and other market participants to generate profits
C.
securities for generating bank capital
D.
securities for generating income


16.
Banker's acceptances are not
A.
foreign deposits accepted overseas by branches of American banks.
B.
drafts drawn on a bank by a corporation to pay for merchandise.
C.
used in international trade.
D.
a source of funds for large banks.


17.
A bank expecting interest rates to rise in the future would prefer to make
A.
fixed-rate loans
B.
long-term, fixed rate loans
C.
floating rate loans adjusted infrequently
D.
floating rate loans adjusted frequently


18.
The primary business of a commercial bank is
A.
make loans
B.
take in deposits
C.
sell certificate of deposits
D.
make investments


19.
Credit analysis
A.
determines when to sell loans to investors.
B.
determines when to bring loan customers together to share funds.
C.
determines the credit worthiness of borrowers.
D.
assists customers in selling their real estate.


20.
The largest loan category for commercial banks is
A.
commercial loans
B.
real estate loans
C.
consumer loans
D.
agricultural loans.


21.
The largest source of funds for commercial banks is
A.
deposit accounts
B.
borrowed funds
C.
government Treasury deposits.
D.
loan capital


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