A bank that grants loans to firms in a many different lines of business: will increase its information cost and decrease its credit risk will increase both its information cost and its credit risk will decrease its information cost and decerase its credit risk will decrease its information costs and increase its credit risk

A bank that grants loans to firms in a many different lines of business: will increase its information cost and decrease its credit risk will increase both its information cost and its credit risk will decrease its information cost and decerase its credit risk will decrease its information costs and increase its credit risk

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 8QE

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Making changes to a firm’s credit policy involves trade-offs. Assuming that all other factors remain constant, which of the following are outcomes expected to result from an increase in a firm’s cash discount? Check all that apply. An increase in the cost of the discounts given An increase in the firm’s bad-debt expenses An increase in the firm’s credit sales, a speeding up of customer payments, and a reduction in the firm’s receivables investment An increase in the creditworthiness of the firm’s customers
Banks still make more money on investments than fees for customer-related non-credit-related fees. They structure loans to earn more in the form of increased interest and reduced risk. In which area do critics accuse investment banks of only being interested in pocketing fees? Select the correct choice : a.Mergers and acquisitions b.Market making c.Commodities trading d.Client-related trading
Which of the following statements about transaction costs and financial intermediation is not true? A. Low transaction costs allow banks to offer diversified assets to their customers B. Low transaction costs allow banks to offer liquidity services C. Low transaction costs are due to diseconomies of scale in financial intermediation D. Low transaction costs allow banks to engage in risk sharing
Explain how commercial bank mange it balance sheet to maximize its profit without affecting the liquidity.
Banks improves the liquidity of the bank by a. Purchasing more assets of the bank b. Increasing the profit rates on saving accounts c. Generating additional income from investment d. By reducing the interest rates on loan
Which statement is incorrect? a. Information and transaction costs related to financial market transactions would be higher if there is no participation of financial intermediaries. b. The common trait of savings banks, commercial banks, credit unions and savings and loan associations is that all of them accept deposits from SSUs and provide credit to DSUs through loans and purchases of securities. c. Finance companies act as a factor by purchasing a firm's receivables at a discount and subsequently processing and collecting the balances of these accounts. d. A lending company operating in the Philippines cannot charge more than 12% annual interest on the loans it grants to borrowers. e. none of the above
Which of the following is most consistent with using debt to reduce agency costs or conflicts? Question 11 options: Increasing debt reduces a firm’s business risk The interest paid on debt reduces taxable income and income taxes The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly The issuance of debt helps firms increase their credit rating
Credit markets are driving long-term changes in banks. Forces that combined to lead to a concentration of low-quality credit in loan portfolios include: Group of answer choices A. Remediation D. Large firms borrowing extensively from individual banks B. Disintermediation C. High cost to extending credit to lower-credit quality obligors
I am currently working on a study guide and came across the following question. Which of the following statements correctly reflects the effects of granting credit to customers? a) total revenues may increase if both the quantity sold and the price per unit increase when credit is granted b) a firm's cash cycle generally increases if credit is granted, all else equal c) both the cost of default and the cost of discounts must be considered before granting credit d) a firm may have to increase its borrowing if it decides to grant credit to its new customers e) all of the above My professor stated that the answer is all of the above, but after going through the readings and resources provided I could not find a way to understand how each answer is considered to be correct. I also e-mailed my professor and am waiting for a response, so I decided to post my question here as well.
For a bank with deficient capital ratios, which of the following actions could be required by regulators to increase the capital ratios, all else constant? A. Reallocate assets to increase the bank's holdings of cash B. Increase the bank's leverage C. Increase the bank's growth rate by making additional commercial loans. D. Increase the bank's dividend payment E. Decrease the bank's holdings of short-term Treasury securities.
Which statement is incorrect? Information and transaction costs related to financial market transactions would be higher if there is no participation of financial intermediaries. The common trait of savings banks, commercial banks, credit unions and savings and loan associations is that all of them accept deposits from SSUs and provide credit to DSUs through loans and purchases of securities. Finance companies act as a factor by purchasing a firm's receivables at a discount and subsequently processing and collecting the balances of these accounts. A lending company operating in the Philippines cannot charge more than 12% annual interest on the loans it grants to borrowers. none of the above
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