Free Printable Banking Quiz Chapter 2

1.

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.

2.

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.

3.

Loans typically fall into each of the following categories except:

a)

Real estate.

b)

Consumer.

c)

Commercial and Industrial (business).

d)

Agricultural.

e)

Municipal.

4.

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.

5.

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.

6.

The noncash expense item on a bank's Report of Income designed to shelter a bank's current earnings from taxes and to help prepare for bad loans is called:

a)

Short-term debt interest

b)

Noninterest expense

c)

Provision for taxes

d)

Provision for possible loan losses

e)

None of the above.

7.

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

a)

Unearned income or discount

b)

Allowance for possible loan losses

c)

Intangible assets

d)

Customer liability on acceptances

e)

None of the above

8.

When a bank serves as a security dealer for certain kinds of securities (mainly federal, state, and local government obligations) the value of these securities is usually recorded in what account on a bank's Report of Condition?

a)

Investment Securities

b)

Taxable and Tax-Exempt Securities

c)

Trading Account Securities

d)

Secondary Reserves

e)

None of the above

9.

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

a)

Net Profit Margin

b)

Net Interest Income

c)

Net Income After Provision for Possible Loan Losses

d)

Income or Loss Before Income Taxes

e)

Net Noninterest Income

10.

The account that is built up by annual noncash expense deductions and is subtracted from Gross Loans on the Report of Condition is:

a)

Unearned income

b)

Nonperforming loans

c)

Allocated loan risk deductions

d)

Allowance for possible loan losses

e)

None of the above.

11.

Nonperforming loans are credits on which any scheduled loan repayments and interest payments are past due for more than:

a)

30 days

b)

60 days

c)

90 days

d)

180 days

e)

None of the above.

12.

One-time only transactions that often involve financial assets or real property pledged as collateral behind a loan and upon which the bank has foreclosed affect a bank's account known as:

a)

Allowance for loan losses

b)

Nonrecurring sales of assets

c)

Asset gains or losses

d)

Provision for loan and security losses

e)

None of the above.

13.

The use of fixed assets, rather than financial assets, in order to increase earnings flowing to a bank's stockholders is known as:

a)

Plant and equipment investment

b)

Financial leverage

c)

Operating leverage

d)

Nondeposit capital

e)

None of the above.

14.

Banks depend heavily upon borrowed funds supplied by customers with little owners' capital invested. This means that banks make heavy use of:

a)

Financial leverage

b)

Capital restructuring

c)

Operating Leverage

d)

Margin borrowing

e)

None of the above.

15.

When a loan is considered uncollectible, the bank's accounting department will write (charge) it off the books by reducing the ______ and the accounts. Which choice below correctly fills in the blank in the preceding sentence?

a)

PLL and Gross Loans

b)

ALL and Net Loans

c)

ALL and Gross Loans

d)

PLL and Net Loans

e)

None of the above.

16.

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:

a)

Gains trading

b)

Performance banking

c)

Loss control trading

d)

Selective portfolio management

e)

None of the above.

17.

Noninterest revenue sources for a bank are called:

a)

Commitment fees on loans

b)

Fee income

c)

Supplemental income

d)

Noninterest margin

e)

None of the above.

18.

A bank sells shares of its common stock with a par value of $100 for $200 in the market. Which two accounts on the bank's balance sheet are going to be affected?

a)

Retained earnings and capital surplus accounts

b)

Subordinated notes and debentures and commons stock outstanding accounts

c)

Retained earnings and common stock outstanding accounts

d)

Common stock outstanding and capital surplus accounts

e)

Only the common stock outstanding account is affected

19.

A type of letter of credit which is widely used in international trade is known as:

a)

Banker's acceptance

b)

Commercial paper

c)

Repurchase agreement

d)

Fed funds purchased

e)

None of the above

20.

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

a)

The statement of stockholders equity

b)

The funds-flow statement

c)

The report of financial condition

d)

The report of income

e)

None of the above

21.

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

a)

Cash and deposits due from bank

b)

Investment securities

c)

Trading account securities

d)

Fed funds sold

e)

None of the above

22.

Which of the following assets is the largest asset item on the bank's balance sheet?

a)

Securities

b)

Cash

c)

Loans

d)

Bank Premises

e)

None of the above

23.

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

a)

Mutual funds

b)

Thrifts

c)

Investment banks

d)

Insurance companies

e)

Pension funds

24.

FASB Rule 115 focuses primarily on bank:

a)

Deposit sources

b)

Investments in marketable securities

c)

Derivatives trading

d)

Loan-loss reserves

e)

Federal funds

25.

Which of the following most accurately describes the principal type(s) of bank noninterest income:

a)

Fees from fiduciary transactions

b)

Fees from deposit transactions

c)

Fees from securities transactions

d)

Fees from additional noninterest income

e)

All of the above

26.

Fee income arising from fiduciary transactions include all of the following except:

a)

Checking account maintenance fees

b)

Fees for managing and protecting a customer’s property

c)

Fees for recordkeeping for corporate security

d)

Fees for dispersing interest and dividend payments for a corporation

e)

Fees for managing corporate and individual retirement plans

27.

You know the following information about the Miller State Bank: Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Net Loans?

a)

$250

b)

$350

c)

$500

d)

$50

e)

$150

28.

You know the following information about the Miller State Bank: Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Depreciation?

a)

$250

b)

$30

c)

$70

d)

$40

e)

$110

29.

You know the following information about the Miller State Bank: Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Total Liabilities?

a)

$390

b)

$60

c)

$450

d)

$500

e)

$50

30.

You know the following information about the Miller State Bank: Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Undivided Profits?

a)

$50

b)

$5

c)

$10

d)

$40

e)

$450

31.

You know the following information about the Miller State Bank: Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Total Liabilities Plus Equity?

a)

$250

b)

$450

c)

$150

d)

$50

e)

$500

32.

You know the following information about the Davis National Bank: Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Net Interest Income?

a)

$300

b)

$150

c)

($50)

d)

$120

e)

$80

33.

You know the following information about the Davis National Bank: Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Net Non Interest Income?

a)

$300

b)

$150

c)

($50)

d)

$120

e)

$80

34.

You know the following information about the Davis National Bank: Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Pretax Net Operating Income (or Net Income before Extraordinary Items)?

a)

$300

b)

$150

c)

($50)

d)

$120

e)

$80

35.

You know the following information about the Davis National Bank: Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Net Income?

a)

$300

b)

$150

c)

($50)

d)

$120

e)

$80

Banking Quiz Chapter 2

Total questions: 35

Worksheet time: 18mins

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