Finance Company Operations

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Question 1
Free
Multiple Choice

____ finance companies concentrate on purchasing credit contracts from retailers and dealers.

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A

Consumer

B

Sales

C

Commercial

D

None of the above

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Question 2
Free
Multiple Choice

Finance companies differ from commercial banks, savings institutions, and credit unions in that they

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A

do not rely heavily on deposits as a source of funds.

B

focus on financing acquisitions by companies.

C

focus on providing residential mortgages.

D

use most of their funds to purchase stocks

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Question 3
Free
Multiple Choice

Which of the following is not a main source of funds for finance companies?

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A

bank loans

B

commercial paper issues

C

bonds

D

borrowing from the Federal Reserve

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Question 4
Free
True/False

Unlike loans made by commercial banks, loans made by finance companies cannot be securitized (bundled together and sold as securities to investors).

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True

False

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Question 5
Free
Multiple Choice

The ________ is the federal agency responsible for regulating consumer finance products and services that may be offered by finance companies.

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A

Consumer Financial Safety Commission

B

Securities and Exchange Commission

C

Consumer Financial Protection Bureau

D

Federal Trade Commission

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Question 6
Multiple Choice

Finance companies would prefer to increase their long-term debt when interest rates

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A
are relatively low and are expected to increase.
B
have increased.
C
have been stable for several years.
D
are projected to decrease.
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Question 7
Multiple Choice

When a finance company purchases a firm's receivables at a discount and becomes responsible for processing and collecting the balances of these accounts, it acts as a

Choose correct answer/s
A
leasing agent.
B
lessor.
C
lessee.
D
factor.
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Question 8
True/False

Finance companies are exempt from state regulations.

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True
False
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Question 9
True/False

Finance companies are not subject to state regulations on intrastate business.

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True
False
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Question 10
Multiple Choice

Finance companies are subject to

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A
disclosure requirements and truth in lending rules.
B
ceiling interest rates on loans provided.
C
a maximum length on loan maturity.
D
regulations on intrastate business.
E
all of the above
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Question 11
Multiple Choice

If finance companies have liabilities that are more rate sensitive than their assets and want to reduce interest rate risk, they could

Choose correct answer/s
A
shorten their average asset life.
B
lengthen their average asset life.
C
shorten the maturity of debt that they issue.
D
make greater use of fixed-rate loans.
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Question 12
True/False

Overall, the liquidity risk of finance companies is higher than that of other financial institutions.

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True
False
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Question 13
Multiple Choice

A wholly owned subsidiary whose primary purpose is to finance sales of the parent company's products and services, provide wholesale financing to distributors of the parent company's products,and purchase receivables of the parent company is a

Choose correct answer/s
A
captive finance subsidiary.
B
factor.
C
leasing agent.
D
captive factoring agent.
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Question 14
Multiple Choice

Which of the following is not a use of finance company funds?

Choose correct answer/s
A
consumer loans
B
business loans
C
commercial paper
D
real estate loans
E
All of the above are uses of finance company funds.
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Question 15
Multiple Choice

Finance companies commonly act as ____ for accounts receivable; that is, they purchase a firm's receivables at a discount and are responsible for processing and collecting the balances of theseaccounts.

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A
brokers
B
dealers
C
market makers
D
factors
E
none of the above
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Question 16
Multiple Choice

A finance company's cash flows are _____ related to changes in economic growth and may be ____ related to changes in the risk-free rate.

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A
positively; inversely
B
inversely; positively
C
inversely; inversely
D
positively; positively
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Question 17
Multiple Choice

Finance companies participate in the ____ market to reduce interest rate risk.

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A
money
B
bond
C
options
D
swap
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Question 18
True/False

Many consumer finance companies provide personal loans directly to individuals to finance purchases of large household items.

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True
False
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Question 19
True/False

Business finance companies focus on loans to very large businesses.

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True
False
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Question 20
True/False

Consumer finance companies sometimes provide mortgage loans to individuals.

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True
False
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