Practice Quiz 6A

TRUE OR FALSE 1. Short-term financial policies that are flexible with regard to current assets includes keeping large balance of short-term debt. 2. Costs that fall with increases in the level of investment in current assets are called shortage costs. 3. The firm further increases the effective interest rate earned by the bank on the committed line of credit.

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Styles Editing QUESTION TWO Voice Sensitivity Editor Rem Selamat Islamic Bank Berhad (SIBB) just announced its financial report for the year ended 2016. Table below is a summary of CIBB's financial report. (a) Items RM (000) Income Statement Operating Revenue Net Income Expenses Profit after tax and zakat 3,662,444 1,540,333 700,343 543,443 Statement of Financial Position Current Asset Current Liability- Demand deposit Total Debt Total Assets 4,332,300 10,635,054 42,091,092 45,620,442 3,729,590 Total Equity Capital Evaluate SIBB's performance based on the following financial ratios and explain what each ratio means. i. The capability of management in converting assets into net earnings. i. The effectiveness of management to control cost, expenses and service price O Focus 目 (United Kingdom) ENC

The financial performance of both Commercial Banks and Savings Banks is measured using the Net Interest Margin (NIM). a, Explain what the Net Interest Margin is measuring and evaluating. b, Cite an example of why the Net Interest Margin could turn negative.

Give typing answer with explanation and conclusion  Q. 23 Why do commercial banks focus on relatively short-term loans?   - b/ short term loans allow rapid turnover of cash flows   - a/ short-term loans are safer   - a,b, and c   - c/ these banks need to coordinate their portfolio with changes in economic conditions and the level of interest rates   - b and c

QUESTION 5 A bank with $10,000 in assets has ROA =2% and ROE =10%. What is its leverage ratio (TA/Equity)?     2.5       5           4       1.25          QUESTION 6 The expected loss of a loan is a function of the following, except     Unexpected loss         Loss given default        Exposure at default       Probability of default

Exhibit 7.5 describes the key financial ratios Standard & Poor’s analysts use to assess credit risk and assign credit ratings to industrial companies. The same financial ratios for three firms follow.     Firm 1 Firm 2 Firm 3 EBIT interest coverage 2.7 12.8 16.7 EBITDA interest coverage 3.7 18.7 24.6 FFO/Total debt (%) 19.8 80.2 135.1 Free operating cash flow/Total debt (%) 8.2 40.6 87.9 Total debt/EBITDA 4.0 1.0 0.3 Return on capital (%) 9.9 29.2 32.7 Total debt/Capital (%) 54.8 30.2 8.1     Required: What credit rating would be assigned to Firm 1? What credit rating would be assigned to Firm 2? Does Firm 3 have more or less credit risk than Firm 2? EXHIBIT7.5

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4. Financial ratios in the forecasting process Your boss has asked you to take a closer look at your company's credit policies. You have been given the following information: Accounts receivable balance: Average daily sales: Weighted average cost of capital: $715,000 $13,450 10% Your firm's days sales outstanding (DSO) is Your boss is unhappy with your company's DSO and wants to bring it down to the industry average of 25 days. The marketing department told you that they expect sales to grow by 12% next year. This means that your company can expect to have an accounts receivable balance of next year.

A security analyst calculates the following ratios for two banks. How should the analyst evaluate the financial health of the two banks.Bank A Bank BROE 22% 24%ROA 2% 1.5%Equity Multiplier 11X 16XProfit Margin 15% 14%Asset Utilization 13% 11%Spread 3% 3%Interest Exp. Ratio 35% 40%Provision for loan loss ratio 1% 4%

N1. Account

Negative Interest rate a. This action was meant to complement the quantitative easing b. encourages banks to lend more instead of keeping them as excess reserves. c. Customers will consume more and deposit less. all are correct.

Tier-1 capital: Refers to the best performing tier of bank assets. Consists mainly of shareholders equity and retained earnings. Provides complete safety net so that bank with a Tier-1 capital ratio above 8.5% cannot fail. Chose 1 option from below: Only III is correct. Only II is correct. Only I is correct. I and II are correct. II and III are correct.   Thanks!

Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to have a positive gap, this means: Group of answer choices C. Rate-sensitive assets exceed rate-sensitive liabilities B. Long-term assets are funded with short-term liabilities D. Rate-sensitive assets equal rate-sensitive liabilities A. Liabilities reprice before assets

Question No: 04 This is a subjective question, hence you have to write your answer in the Text-Field given below. "In case of financial institutions along with financial performance financial stability is also very crucial." Discus with suitable illustrations the ratios calculated in order to measure financial stability of a bank.

please explain the detail

Assume two banks are equal to each other in size in terms of total assets. The bank which has more liquidity will have a lower return on equity Select one: O True O False

In comparison to small banks, larger banks typically have A-fewer core deposits. B-All of these choices are correct. C-more equity capital. D-larger net interest margins.

3. Consider the model of Credit Risk and Dilution Costs in Freixas and Rochet 2.5.5 based on Bolton and Freixas (2000) where firms have to choose between Bond financing, Equity Issue and Bank debt. Firms live for two periods and in each period will obtain, y, if suc- cessful and zero if unsuccessful. The probability of success in period 2 is 1 for good firms and O for bad firms, where each firms knows its own type but lenders cannnot see this type, where the proportion of good firms in period 2 is v. The probability of success in period 1 is uniformly distributed independently of type over the interval [plow, 1]. This probability is observable and represents a frim's credit rating. Under bond financing,the firm is liquidated for value A if unsuccessful in period 1. Under equity issue a share ac 0, 1] of any cash flow is given to the investors and under bank debt, if the firms defaults in period 1 then bank will claim all revenues in period 2 at a cost of C for monitoring and…

First National Bank has assets that are more rate-sensitive than its liabilities.  As interest rates rise, then we should expect the bank profits to: A. Rise B. Fall C. Remain unchanged

4: Which of the following statements about bank capital are TRUE? Banks hold equity capital to make sure they have enough cash to withstand deposit outflows. Banks with larger leverage ratios have less capital per dollar of assets. A bank holds equity capital to prevent insolvency. The level of bank capital is determined by the owners of the bank without any regulation. The only goal for capital adequacy management is to earn a high return with low risk. The level of bank capital will decrease when a bank has to write-down the value of an asset.

13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.

Assets Current assets Cash. Accounts receivable Total current assets Fixed Assets Property, plant & equipment Accumulated depreciation Net fixed assets Total assets Liabilities and Owner's Equity Current liabilities Accounts payable Note payable Deposits from customers Total current liabilities Total liabilities Owner's equity Common stock Retained earnings Total owner's equity Total liabilities and equity Applying for a Loan. 14,000 7,000 21,000 112,000 (35,000) 77,000 98,000 2,500 26,500 5,000 34,000 34,000 50,000 14,000 64,000 98,000 Use balance sheet to the process of applying for a loan 11. What is the amount of current assets and long-term assets, that you have?

Statement A: Capital acts as regulator of growth. If bank is trying to grow too fast, shortage of capital will stop the bank from growing because of Capital adequacy regulations Statement B: Capital provides funds for growth. The more capital a bank has the more it will be able to expand and diversify Select one: a. Dont agree with both A and B O b.Agree with both A and B O C Agree with B but not with A d. Agree with A but not with B