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Banks perform the indispensable tasks of creating money through lending, absorbing excess liquidity from other institutions, and facilitating transactions between spending and saving parties. Banks are regulated for all the reasons listed, including being repositories of public savings and having the power to create money. Banks generate most of their income from loans and depend on financial leverage through borrowed funds rather than owners' capital.

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48 views13 pages

Sample MCQs

Banks perform the indispensable tasks of creating money through lending, absorbing excess liquidity from other institutions, and facilitating transactions between spending and saving parties. Banks are regulated for all the reasons listed, including being repositories of public savings and having the power to create money. Banks generate most of their income from loans and depend on financial leverage through borrowed funds rather than owners' capital.

Uploaded by

Jasmin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Banks perform the indispensable task of: 

  creating money without making loans.


  absorbing the excess liquidity created by other financial institutions.
  intermediating between surplus-spending parties and deficit-spending parties.
  issuing risky deposits.

Banks are regulated for which of the reasons listed below? 


 

  Banks are leading repositories of the public's savings.


  Banks have the power to create money.
  Banks provide businesses and individuals with loans that support consumption and
investment spending.
All of the options are correct.

Banks generate their largest portion of income from: 


 

  loans.
  short-term investments.
  demand deposits.
  trading account gains & fees.

A financial institution's bad-debt reserve, as reported on its balance sheet, is called: 


 

  unearned income or discount.


  allowance for possible loan losses.
  intangible assets.
  customer liability on acceptances.
Banks depend heavily upon borrowed funds supplied by customers with little owners' capital
invested. This means that banks make heavy use of: 
 

  financial leverage.
  capital restructuring.
  operating leverage.
  margin borrowing.

You know the following information about the Federal Bank:

   

Given this information, what is the value of this firm's depreciation? 


 

  $250
  $30
  $70
  $40
  $110
 
Following is the information for Carter State Bank. What is the bank's ROE?

    
 

  8.46 percent
  16.03 percent
  15.71 percent
  1.36 percent

You know the following information about the Webb State Bank:

   

Given this information, what is the value of this firm's total assets? 
 

  $1,000
  $300
  $800
  $200
The TRC Bank has a net profit margin of 7.5%, an asset utilization ratio of 18%, and an
equity multiplier of 20. What is the bank's ROA? 
 

  27.00 percent
  1.35 percent
  7.50 percent
  1.50 percent
The following financial information pertains to Harrison Bank.

   
 
What is the bank's ROA? 
 

  1.6%
  10%
  12.8%
  16%
The following financial information pertains to Harrison Bank.

   

What is the bank's equity multiplier? 


  1.6 times
  10 times
  12.8 times
16 Times
Following data pertains to Capital Bank.

   
 
What is CapitaBank's ROE? 
 

  20.45%
  18.33%
  12.22%
  7.33%
 
What is the bank's ROA? 
 

  20.45%
  18.33%
  12.22%
  2.5%
 
What is the bank's net profit margin? 
 

  20.45%
  18.33%
  12.22%
  7.33%

 
What is the bank's asset utilization ratio? 
 

  20.45%
  18.33%
  12.22%
  7.33%

 
What is the bank's equity multiplier? 
 

  20.45 times
  18.33 times
  12.22 times
  7.33 times

 
What is the bank's earnings spread? 
 

  37.5%
  22.22%
  14.33%
  7.89%
  2.5%
Securities purchased to provide short-term profits from short-term price movements are
reported as: 
 

investment securities.
trading account assets.
reverse repurchase agreements.
due from depository institutions.

The largest expense item often observed in the financial statement of the banks is: 
 

  personnel cost.
  premises and equipment cost.
  interest on borrowed funds.
  provision for loan loss.

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