Exam 17: Lending to Business Firms and Pricing Business Loans

Which of the following short-term loans are traded in the secondary market and usually carry an interest rate based upon the London Interbank Offered Rate (LIBOR)on Eurocurrency deposits?

______________________ refers to the borrowers' use of debt in their firm.

If interest rates fall,a customer's loan rate will decline more rapidly under the times-prime method than under the prime-plus method of business loan pricing.

A firm submits their financial records to a bank.Upon examination,the bank discovers that this firm has $500 in cash,$2,500 in accounts receivables,$1,000 in inventory,$5,000 in plant and equipment and that their assets totaled $9,000.In addition this bank discovered that the firm had $2,000 in current liabilities,$2,500 in long-term debt,and $4,500 in net worth.Finally,this bank discovered that this firm had $20,000 in net sales (all of which are on credit)and $2,000 in net income.What is this firm's average collection period?

A bank is concerned because they feel that a firm will not be able to raise enough cash to pay bills that are due within the next year.What ratio are they most likely to examine to address this concern?

When analyzing a commercial loan credit request,which of the following statements is (are)correct?

____________ is a type of short-term loan,where the business lenders support installment purchases of automobiles,home appliances,furniture,business equipment,and other durable goods by financing the receivables that dealers take on when they write installment contracts to cover customer purchases.

Liquidity indicators measure a business firm's ability to raise cash in a timely fashion at a reasonable cost.

The firm's coverage ratios measure how carefully the firm's management monitor and control its expenses.

Floor planning agreements typically include a loan-loss reserve,built up from interest earned as borrowers repay their installment loans.

A project loan granted on its own merits and which does not have a sponsor to guarantee the loan is known as a project loan granted on:

A security dealer requires credit to add new government securities to his security portfolio.What type of loan is this?

A bank wants to estimate a firm's future financial condition.Which of the following is something that allows a bank to do this?

Business loans designed to fund long-term business investments,such as the purchase of equipment or the construction of physical facilities,covering a period longer than one year are known as:

Term loans normally are secured by:

______________________ is the average deposit balance by the customer minus the average float adjusted for reserve requirements.

The business loan pricing method which starts with a base rate such as a bank's prime rate and adds a markup for default and term risk is known as:

The amount of business lending tends to fall during recessionary periods.

The Wabash Washing Machine Company has arranged to get a loan from their bank over the next five years.They can borrow up to a pre-specified limit and repay it as many times as they need until the loan matures.The Wabash Washing Machine Company has not pledged any specific collateral for this loan.What type of loan is this most likely to be?

Which dimension of a business firm's financial and operating performance would the gross profit margin fit best?