商业银行管理彼得S.罗斯英文原书第8版 英语试题库Chap005

Chapter 5

The Financial Statements of Banks and Their Principal Competitors

Fill in the Blank Questions

1. Fed funds purchased is an example of _______________________ along with Eurodollar

borrowings.

Answer: nondeposit borrowings

2. The short term securities of the bank, including T-Bills and commercial paper, are often called

__________________________ because they are the second line of defense to meet demands for cash.

Answer: secondary reserves

3. __________________________ is a noncash expense on the bank's income statement which

allows the bank to account for future bad loans. Answer: Provision for loan losses

4. __________________________ is the difference between interest income and interest expenses

for a financial institution. Answer: Net interest income

5. __________________________ are the primary long term liabilities of the bank. These liabilities

are paid only after deposits have been paid in the event of bankruptcy. Answer: Subordinated notes and debentures

6. A(n)__________________________ is where the financial institution agrees to guarantee

repayment of a customer's loan received from a third party. Answer: standby credit agreement

7. A(n)__________________________ is a short term collateralized loan. The collateral that is used

generally consists of T-Bills. Answer: repurchase agreement

8. A(n)__________________________ is a deposit account which pays an interest rate competitive

with money market mutual funds and which generally has limited check writing ability. Answer: money market deposit account

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9. _____________________ is the sum of all outstanding IOU's owed to the bank in the form of

consumer, real estate, commercial and agriculture loans as well as other types of credit extensions. Answer: gross loans

10. A financial institution often records the value of its assets and liabilities at _______________

which is the original or historical cost of the asset. Answer: book value

11. The principal types of__________________________ include fee income, income from fiduciary

activities and services charges on deposits. Answer: noninterest income

12. The__________________________ shows the amount of revenues received and expenses incurred

over a specific time period.

Answer: Report of Income (income statement)

13. The__________________________ lists the assets, liabilities and equity capital held by the bank

on a given date.

Answer: Report of Condition (balance sheet)

14. ______________ is labeled \

Answer: FASB 133

15. ________________ labeled “Accounting for Derivative Instruments and Hedging Activities” and

its recent amendments, FASB 138, are designed to make derivatives more publicly visible on corporate financial statements. Answer: FASB 133

16. Under _____________ banks must account for the expected loss of interest income on

nonperforming loans when calculating their loan-loss provision. Answer: FASB 114

17. Temporarily buying and selling securities by a securities firm in a thinly traded market so as to

influence the price is known as _________________. Answer: painting the tape

18. The activity of manipulating the financial statements to artificially enhance the banks financial

strength is known as ___________________.

Answer: window dressing or ?creative accounting?

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19. is direct and indirect investment in real estate. These are properties obtained for compensations for nonperforming loans. Answer: Other Real Estate Owned (OREO)

20. consists of interest income received on loans from customers that has not yet been earned by the bank under accrual accounting methods. Answer: Unearned discount income

21. can be held by individuals and nonprofit institutions, bear interest and permit drafts from being written against the account to pay third parties. Answer: Now accounts

22. In the worldwide banking system, represent transferable time deposits in a variety of currencies and are often the principal source of short term borrows by banks. Answer: Eurocurrency Borrowings

23. One part of arises from fees charged for ATM and POS transactions. Answer: Other Noninterest Income

24. Fees that arise from a financial firm?s trust activities, fees for managing a corporations? interest and

dividend payments and fees for managing corporate or individual retirement plans are all included in the category of fees arising from . Answer: fiduciary activities

25. Checking account maintenance fees and overdraft fees are included in the noninterest income

account under . Answer: service charges on deposit accounts

True/False Questions

T F 26. On a bank's income statement (Report of Income) deposit costs are financial inputs.

Answer: True

T

F 27. Loans and leases are financial outputs on a financial institution's balance sheet or Report of

Condition.

Answer: True

T

F 28. Nondeposit borrowings are a financial input on a bank's balance sheet or Report of

Condition.

Answer: True

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T

F 29. The cost of nondeposit borrowings is a financial input on a bank's income statement or

Report of Income.

Answer: True

T

F 30. Securities income is a financial output listed on a financial institution's Report of

Condition.

Answer: False

T

F 31. Net loans on a bank's balance sheet are derived by deducting the allowance for loan losses

and unearned discounts from gross loans.

Answer: True

T

F 32. When a loan is classified as nonperforming any accrued interest recorded on the bank's books, but not actually received, must be deducted from a bank's loan revenues.

Answer: True

T T

F 33. In U.S. banking, securities gains are treated as ordinary income. Answer: True

F 34. Most banks report securities gains as a component of their total noninterest income. Answer: False

T

F 35. A bank displaying trading account securities on its balance sheet is serving as a security

dealer and plans to sell those securities before they reach maturity.

Answer: True

T

F 36. Bad loans normally do not affect a bank's current income. Answer: True

T

F 37. The expensing of a worthless loan usually must occur in the year that loan become

worthless.

Answer: True

T

F 38. Recoveries on loans previously charged off are added to the Provision for Loan Losses

(PLL) account on a bank's income statement.

Answer: False

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T

F 39. Loan-loss reserves set aside to cover a particular loan or loans expected to be a problem or

present the bank with above-average risk are known as specific reserves. Answer: True

T

F 40. U.S. banks (especially those with $500 million or more in total assets) are required to file

financial statements audited by an independent public accountant with their principal federal regulatory agency.

Answer: True

T

F 41. Off-balance-sheet items for a bank are fee generating transactions which are not recorded

on their balance sheet.

Answer: True

T

F 42. The experience method of accounting for future loan loss reserves allows a bank to deduct

from their income statement up to .6 percent of their eligible loans.

Answer: False

T

F 43. After the Tax Reform Act of 1986, large banks (>$500 million in assets) were required to

use the reserve method of accounting for future loan loss reserves.

Answer: False

T

F 44. The number one source of revenue for a bank based on dollar volume is loan income. Answer: True

T

F 45. In looking at comparative balance sheets, it can be seen that large banks rely more heavily

on nondeposit borrowings while small banks rely more heavily on deposits.

Answer: True

T

F 46. The Pension Fund industry is now larger than the Mutual Fund industry. Answer: False

T

F 47. Off-balance-sheet items for banks have declined in recent years. Answer: False

T

F 48. Except for banks, Savings & Loans and Savings Banks hold the most deposits. Answer: True

T

F 49. \

loans.

Answer: False

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