Chap 5

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

• None of the above.

The difference between noninterest income and noninterest expenses on a bank's Report of Income is called:

• Net Profit Margin

• Net Interest Income

• Net Income After Provision for Possible Loan Losses

• Income or Loss Before Income Taxes

• Net Noninterest Income

Noninterest revenue sources for a bank are called:

• Commitment fees on loans

• Fee income

• Supplemental income

• Noninterest margin

• None of the above.

What financial service industry category is second to the banking industry in total assets held:

• Mutual funds

• Thrifts

• Investment banks

• Insurance companies

• Pension funds

A bank's temporary lending of excess reserves to other banks is labeled on the balance sheet as:

• Fed Funds Purchased

• Fed Funds Sold

• Money Market Deposits

• Securities Purchased for Resale

• None of the above

The common banking practice of selling those investment securities that have appreciated in order to reap a capital gain and holding onto those securities whose prices have declined is known as:

• Gains trading

• Performance banking

• Loss control trading

• Selective portfolio management

• None of the above.

Large U.S. banks must use which of the methods listed below to determine their provision for loan loss expense?

• Experience method

• Reserve method

• Specific charge-off method

• Historical cost method

• None of the above.

Banks generate their largest portion of income from:

• Loans

• Short-term investment

• Demand deposits

• Long-term investments

• Certificates of deposit

Which of the following financial statements shows the revenues and expense of a bank over a set period of time?

• The statement of stockholders equity

• The funds-flow statement

• The report of financial condition

• The report of income

• None of the above

Which of the following accounts is sometimes called the bank's primary reserves?

• Cash and deposits due from bank

• Investment securities

• Trading account securities

• Fed funds sold

• None of the above