ECO 315 Chapter 9
The assets appears on the _______ side whereas the liabilities appear on the _______ side of the balance sheet.
left-hand; right-hand
Which of the following is true about the balance sheet?
Assets = Liabilities plus Equity
If a bank has an asset of $20 million, equity of $5 million, and profits of $2 million, its return on equity would be ______.
40%
If a bank has an asset of $30 million, liabilities of $25 million, and profits of $4 million, its return on assets would be ______.
13.3%
In a bank's balance sheet, the liabilites column represents the ______ of funds and generates ______ for the bank
sources; expenses
To evaluate the financial health of a bank, essential financial reports that one should examine are the _________.
- Balance sheet - Income statement - statement of cash flow
Which of the following is true?
- Banks can loan out all of their excess reserves - Banks are subject to the minimum capital requirement - Banks can loan out depositors' money
Which of the following can be used to manage a bank's short-term liquidity problem?
- Borrow from the Federal funds market - Borrow from the Fed's discount window - sell the secondary reserves
What are the broad areas of bank management issues that were discussed in lecture?
- Liquidity - Assets and Liabilities
The primary assets of a commercial bank are _____.
- bonds purchased and held by the bank. - mortgage loans made to customers.
Which of the following is part of 4C's of Lending?
- collateral - capability - character - capital
When the net interest margin ______, a bank's profit _____.
- increases; increases - decreases; decreases
Which of the following belong in the liabilities column of a bank's balance sheet?
- the bank customers' checkable deposits - the bank's borrowing
If a bank has an asset of $20 million, equity of $5 million, and profits of $2 million, its return on assets would be ______.
10%
In a broad sense, a commercial bank's equity capital is _____.
a liability to the bank's shareholders
The return on assets (ROA) is measured as _______
a ratio of profits over assets
Good asset management by a bank manager means __________.
apply 4C's of lending
If a bank has a poorly performing loans, it is faced with______ management problem.
assets
A minimum capital requirement rate of 5% means that a bank's _____ should be at minimum 5% of the bank's _____.
capital; assets
Holding profits and equity of a bank constant, if a bank's liabilities increase, its return on assets will ______.
decrease
The primary liabilities of banks are _____.
deposits made by customers.
Financial institutions search for ________ has resulted in many financial innovations.
higher profits
Holding all else constant, if the deposit rate decreases, the bank's profit will likely ________.
increase
U.S. Treasuries appears on the _______ side whereas large time deposits appear on the _______ side of the bank's balance sheet.
left-hand; right-hand
In order to reduce risk and increase the safety of financial institutions, commercial banks and other depository institutions are prohibited from
owning common stock.
There is a/an ________ relationship between the change in the net interest margin and the change in a bank's profit.
positive
Holding profits and equity of a bank constant, if a bank's liabilities increase, its return on equity will ______.
remain unchanged
In a bank's balance sheet, the assets column represents the ______ of funds and generates ______ for the bank
uses; income
In a bank's balance sheet, the assets column represents the ______ of funds whereas the liabilities column represents the _____ of funds
uses; sources
