Chapter 3 in Class Question
Chapter 3
Analyzing Bank Performance
1. Which of the following is not a characteristic of a typical commercial bank? a. Most banks own few fixed assets. b. Most banks have a high degree of operating leverage. c. Most banks have few fixed costs. d. Many bank liabilities are payable on demand. e. Banks generally operate with less equity capital than non-financial firms. Answer: b
2. Bank assets fall into each of the following categories except: a. loans. b. investment securities. c. demand deposits. d. noninterest cash and due from banks. e. other assets.
Answer: c
3. Which of the following would not be considered a commercial loan? a. An interim construction loan b. A working capital loan c. A loans to another financial institution d. A loan to purchase a piece of industrial equipment e. A loan to expand a factory Answer: a
4. Banks generate their largest portion of income from: a. loans. b. short-term investment. c. demand deposits. d. long-term investments. e. certificates of deposit. Answer: a
5. Which of the following adjustments are made to gross loans and leases to obtain net loans and leases? a. The loan and lease loss allowance is subtracted from gross loans b. Unearned income is subtracted from gross interest received c. Investment income is added to gross interest received d. a. and b. e. a. and c.
Answer: d
6. An example of a contra-asset account is: a. the loan and lease loss allowance. b. unearned income. c. buildings and equipment. d. revenue bonds. e. the provision for loan loss.
Answer: a
7. Which of the following bank assets is the most liquid? a. Long-term investments b. Short-term investments c. Loans d. Demand deposits e. Unearned income
Answer: b
8. Which of the following would a bank generally classify as a short-term investment? a. Demand deposits b.
Analyzing Bank Performance
1. Which of the following is not a characteristic of a typical commercial bank? a. Most banks own few fixed assets. b. Most banks have a high degree of operating leverage. c. Most banks have few fixed costs. d. Many bank liabilities are payable on demand. e. Banks generally operate with less equity capital than non-financial firms. Answer: b
2. Bank assets fall into each of the following categories except: a. loans. b. investment securities. c. demand deposits. d. noninterest cash and due from banks. e. other assets.
Answer: c
3. Which of the following would not be considered a commercial loan? a. An interim construction loan b. A working capital loan c. A loans to another financial institution d. A loan to purchase a piece of industrial equipment e. A loan to expand a factory Answer: a
4. Banks generate their largest portion of income from: a. loans. b. short-term investment. c. demand deposits. d. long-term investments. e. certificates of deposit. Answer: a
5. Which of the following adjustments are made to gross loans and leases to obtain net loans and leases? a. The loan and lease loss allowance is subtracted from gross loans b. Unearned income is subtracted from gross interest received c. Investment income is added to gross interest received d. a. and b. e. a. and c.
Answer: d
6. An example of a contra-asset account is: a. the loan and lease loss allowance. b. unearned income. c. buildings and equipment. d. revenue bonds. e. the provision for loan loss.
Answer: a
7. Which of the following bank assets is the most liquid? a. Long-term investments b. Short-term investments c. Loans d. Demand deposits e. Unearned income
Answer: b
8. Which of the following would a bank generally classify as a short-term investment? a. Demand deposits b.