42. Recoveries refer to: a.the dollar value of loans actually written off as uncollectible.b.the dollar amount of loans that were previously charged-off but now collected.c.net charge-offs.d.loans not currently accruing interest.e.loans that regulators have required the bank to “recover”.Answer: bTrue/False1. Subordinated bank debt is federally insured.Answer: False2. Total revenue is the same as total operating income.Answer: True3. Retail banks deal primarily with commercial customers.Answer: False4. Balance sheet items are considered stock variables.Answer: True27
5. Regarding interest expense, volume effects suggest that the mix of liabilities among banks may differ. Essay Questions 1. What are the principal sources of risk facing a bank manager? 2. What are some of the advantages and disadvantages of using ratio analysis to examine the financial performance of a bank?3. From a financial statement perspective, discuss how banks differ from non-financial companies. Multiple Choice36. The noncash expense item on a bank's Report of Income designed to shelter a bank's current earnings from taxes and to help prepare for bad loans is called: 37. A bank's bad-debt reserve, as reported on its balance sheet, is called: 38. When a bank serves as a security dealer for certain kinds of securities (mainlyfederal, state, and local government obligations) the value of these securities is usually recorded in what account on a bank's Report of Condition? 28
39. The difference between noninterest income and noninterest expenses on a bank's Report of Income is called: A. Net Profit MarginB. Net Interest IncomeC. Net Income After Provision for Possible Loan LossesD. Income or Loss Before Income TaxesE. Net Noninterest IncomeAns: B40. The account that is built up by annual noncash expense deductions and is generally labeled ALL is:
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