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    Activity 04

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    Mahra AlMazrouei
    One-time transactions involving foreclosed collateral affect a bank's "Asset gains or losses" account. Using fixed assets to increase stockholder earnings is known as "Operating leverage". Banks rely heavily on "Financial leverage" by borrowing funds with little capital invested. When a loan becomes uncollectible, the bank will write it off by reducing the "ALL and Gross Loans" accounts.

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    Activity 04

    Uploaded by

    Mahra AlMazrouei
    14 views2 pages
    One-time transactions involving foreclosed collateral affect a bank's "Asset gains or losses" account. Using fixed assets to increase stockholder earnings is known as "Operating leverage". Banks rely heavily on "Financial leverage" by borrowing funds with little capital invested. When a loan becomes uncollectible, the bank will write it off by reducing the "ALL and Gross Loans" accounts.

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    Activity 04_b3c0d593a29da1b105d769b3e17956c8

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    One-time transactions involving foreclosed collateral affect a bank's "Asset gains or losses" account. Using fixed assets to increase stockholder earnings is known as "Operating leverage". Banks rely heavily on "Financial leverage" by borrowing funds with little capital invested. When a loan becomes uncollectible, the bank will write it off by reducing the "ALL and Gross Loans" accounts.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    14 views2 pages

    Activity 04

    Uploaded by

    Mahra AlMazrouei
    One-time transactions involving foreclosed collateral affect a bank's "Asset gains or losses" account. Using fixed assets to increase stockholder earnings is known as "Operating leverage". Banks rely heavily on "Financial leverage" by borrowing funds with little capital invested. When a loan becomes uncollectible, the bank will write it off by reducing the "ALL and Gross Loans" accounts.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Activity 04

    1. 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.

    2. 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.

    3. 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.

    4. 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.

    5. 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.
    6. 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.

    7. Large U.S. banks must use which of the methods listed below to determine their provision for
    loan loss expense?
    A) Experience method
    B) Reserve method
    C) Specific charge-off method
    D) Historical cost method
    E) None of the above.

    8. A bank's temporary lending of excess reserves to other banks is labeled on the balance sheet as:
    A) Fed Funds Purchased
    B) Fed Funds Sold
    C) Money Market Deposits
    D) Securities Purchased for Resale
    E) None of the above

    9. 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

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