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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Consumer

Sales

Commercial

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

focus on financing acquisitions by companies.

focus on providing residential mortgages.

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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bank loans

commercial paper issues

bonds

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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Consumer Financial Safety Commission

Securities and Exchange Commission

Consumer Financial Protection Bureau

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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are relatively low and are expected to increase.

have increased.

have been stable for several years.

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

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leasing agent.

lessor.

lessee.

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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disclosure requirements and truth in lending rules.

ceiling interest rates on loans provided.

a maximum length on loan maturity.

regulations on intrastate business.

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

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shorten their average asset life.

lengthen their average asset life.

shorten the maturity of debt that they issue.

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

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captive finance subsidiary.

factor.

leasing agent.

captive factoring agent.

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Question 14

Multiple Choice

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

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consumer loans

business loans

commercial paper

real estate loans

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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brokers

dealers

market makers

factors

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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positively; inversely

inversely; positively

inversely; inversely

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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money

bond

options

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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Finance Company Operations

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

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

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

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

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

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

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

Finance companies are exempt from state regulations.

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

Finance companies are subject to

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

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

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

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

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.

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

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

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

Business finance companies focus on loans to very large businesses.

Consumer finance companies sometimes provide mortgage loans to individuals.

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