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Exam 16: Lending Policies and Procedures: Managing Credit Risk

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Question 51

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Jessica Simpson,a loan officer with First National Bank,visits the Tate Manufacturing Company and talks to other lenders to see their experience with Tate Manufacturing.What step in the lending process is Jessica performing?

A) Finding prospective customers
B) Evaluating a customer's character and sincerity
C) Making a site visit and evaluating a customer's credit history
D) Evaluating a prospective customer's financial condition
E) Assessing possible collateral and signing the loan agreement

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Question 52

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The letter "M" in the CAMELS rating system for banks in the U.S.refers to the "management quality" of a bank.

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Question 53

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______________________ loans are those that are granted to businesses to cover purchases of inventory,paying taxes,and meeting payrolls.

Loans extended to farm and ranch operations to assist in planting and harvesting crops and to support the feeding and care of livestock are known as:

________________________ include credit to finance the purchase of automobiles,mobile homes,appliances,and other retail goods and services purchased by consumers.

Accounts receivable financing entails a bank actually taking over the ownership of receivables,whereas factoring entails a bank merely lending money against a borrowing customer's receivables and the customer still retains the ownership of the receivables.

The Tate Manufacturing Company has $150 million in sales revenue with $90 million in cost of goods sold.It has selling and administrative expenses of $10,pays annual taxes in the amount of $10 and has depreciation and other non-cash expenses of $30 million.What are this firm's annual projected cash flows?

For ease and convenience,most banks have the loan review conducted by the same person who makes the loan.This is particularly true of large banks.

A loan officer of Second National Bank of Laramie decides to review the insurance coverage of one of its business customers.Which of the 6 Cs of lending would this piece of information belong to?

Which of the following is a factor in determining the mix of loans that a bank has?

A depository institution's _________________ normally determines its legal lending limit to a single borrower.

A good collateral for the purpose of protecting a lender should be:

The principal economic function of banks is to:

A lender that makes a loan to an individual whose only income is commission based and who hasn't made a sale in six weeks may be violating which of the 6 Cs of lending?

The TRC Company is required by its bank to pay no dividend over $3 per share.What is this restraint known as?

Jerry LeGere,a loan officer with First National Bank,checks to see if the house pledged to back up a home mortgage has a clear title and proper insurance.What step in the lending process is Jerry performing?

One of the elements of CAMELS rating system is _____________________ which looks at the quality of a bank's loans.Examiners look at all loans over a certain size and a random selection of all other loans when looking at this aspect of a bank.

There are three principal sources of cash to repay a loan.These are cash flows generated from sales or income,funds generated from the liquidation of assets,and,funds raised by selling debt or equity securities.

Commercial banks are the largest originator of household loans.

Loans to finance one-to-four family homes fall under which loan category?