The predominant form of household debt is: A) consumer installment debt. B) collateralized debt. C) unsecured debt. D) unrestricted debt. | Homework.Study.com (2024)

Get access to this video and our entire Q&A library

• Credit card debt is: A) secured debt. B) unsecured debt. C) restricted debt. D) unrestricted debt.
• Collateralized debt is also know as: A) unsecured debt. B) secured debt. C) unrestricted debt. D) promissory debt.
• Which of the following would be classified as a long-termliability? A. Education loan balance B. Credit card debt C. Bank card debt D. All of these
• Choose the correct answer to complete the following sentence. Recourse debt is debt: a) For which the debtor is not personally liable. b) For which the debtor is personally liable. c) That is secur
• Advantages of debt financing over equity financing are that: A) control is not diluted B) repayment of debt principal is optional C) more money is available D) interest payments on debt are not ta
• ________ bubble is driven entirely by unrealistic optimistic expectations. A) An irrational exuberance B) A credit-driven C) A stock D) A debt-driven
• The financial leverage characteristic of long-term debt results in? A. a reduction of the risk that creditors will not be paid. B. a magnification of ROE relative to what it would be without long-term debt. C. a magnification of ROI relative to what it
• Special assessment debt may be, in economic substance and/or legal form, an obligation of the assessed property owners rather than a government. Should the government, therefore, report it in its statements as if it were its own debt? What are the current
• To an economist, __________ is anything that is generally accepted in payment for goods and services or in the repayment of debt. A) wealth B) income C) money D) credit
• When canceling debt before its maturity, debt retirement, it is theorized that the recall of the debt is a current decision. For that reason, any gains or losses arising from the debt retirement should be ______. (a) reported in the current period income
• Which of the following is correct with respect to understanding the 'Big Picture' for this class? A. At inception, the primary source of capital for most firms will be the debt provided by creditors. B. Costs associated with future growth and which prod
• Severe fiscal imbalances can directly trigger a currency crisis since: A) investors fear that the government may not be able to pay back the debt and so begin to sell domestic currency. B) the government may stop printing money. C) the government may have
• The primary assets of credit unions are: A) municipal bonds. B) business loans. C) consumer loans. D) mortgages.
• According to AASB, 1053 Application of Tiers of Australian Accounting Standards, a for-profit private sector entity has public accountability if: a. its debt or equity instruments are traded in a public market. b. It is in the process of issuing debt or e
• Differentiate between the two (2) categories of liabilities (i.e., fully secured and partially secured) that have priority in business liquidation. Analyze the main reasons why unsecured creditors fav
• Which one of the following types of securities has no priority in a bankruptcy proceeding? a. Convertible bond. b. Senior debt. c. Common stock. d. Preferred stock. e. Straight bond.
• In a bankruptcy proceeding, what is the significance of liability with priority? What are the general categories of liabilities that have priority in a liquidation?
• Which of the following is not an element of a fraudulent transfer that is made for less than a reasonably equivalent value? a. The debtor knew the debts could not be repaid at maturity b. The debtor becomes insolvent as a result of the transfer c. The
• Which of the following is the minimum limitation necessary for filing an involuntary bankruptcy petition? a. The signature of 12 creditors to whom the debtor owes at least $10,000 in unsecured debt. b. The signature of six creditors to whom the debtor o
• Which of the following statements is correct? A. Separating the amount received from the issuance of bonds with detachable warrants into debt and equity components usually results in a premium on bonds. B. The use of the proportional method for allocating
• Which of the following represent reasonably possible contingent liabilities? Select all that apply. a. warranties b. potential legal claims c. debt guarantees d. accounts payable
• Which is the most stringent test of a company's ability to meet its current obligations? \\A. Times interest earned. \\B. Debt-equity ratio. \\C. Current ratio. \\D. Quick ratio.
• Which of the following unsecured debts of $500 each would have the highest relative priority in the distribution of a bankruptcy estate in a liquidation proceeding? Select one: a. Tax claims of state
• The quality of receivables refers to: a) The credit worthiness of sellers b) The speed of collection c) The likelihood of collection without loss d) Sales turnover
• The most common type of discount lending that the Fed extends to banks is called: s) seasonal credit. b) secondary credit. c) primary credit. d) installment credit.
• If a debtor defaults and the debtor's surety satisfies the obligation, the surety acquires the right of: A) subrogation. B) primary lien. C) indemnification. D) satisfaction.
• What is a key decision that needs to be made with regards to borrowing money from lenders? A) The location B) Pro forma income statement C) How much capital to acquire D) Job descriptions
• Which of the following is a common contingent liability that is often reported on the balance sheet as a liability because of its probable nature? A. Warranties B. Bonds C. Taxes D. Salaries
• The originate-to-distribute business model has a serious ________ problem since the mortgage broker has little incentive to make sure that the mortgagee is a good credit risk. A) principal-agent. B) debt deflation. C) democratization of credit. D) collate
• Trident Financial has two main divisions, mortgage loans and consumer loans. The mortgage loan division showed a profit of $400 million last year and had total assets of $2 billion. The consumer loans division showed a profit of $2.5 billion last year and
• What are the essential characteristics of a liability under the definition in the Conceptual Framework? I. Settlement requiring an outflow of resources embodying economic benefits. II. A present obligation to an external party. III. A legal debt. IV.
• Basic sources (forms) of capital include which of the following? a. Debt b. Equity c. Leases d. Convertible bonds e. Both (a) and (b)
• What is the purpose of the debt covenant from a contracting theory perspective? Is the debt contract an efficient contract?
• Which of the following are primary concerns of the bank manager? A) Maintaining sufficient reserves to minimize the cost to the bank of deposit outflows B) Extending loans to borrowers who will pay low interest rates, but who are poor credit risks C) Acqu
• Which of the following choices lists the least to most aggressive actions in the pursuit of overdue debt? a. 1) A collection agency, 2) court action, 3) a letter requesting overdue payment b. 1) Court action, 2) a collection agency, 3) a letter requesting
• Choose the term that best fits each of the following definitions and descriptions. _____1. A note written in the form where the face amount includes the interest charges. _____2. The borrowing of money with receivables pledged as security on the loan.
• When a property with a fair market value of $68,000 and recourse debt of $84,000 is canceled, the potential cancellation of debt income is: a. $0 b. $16,000 c. $68,000 d. $84,000
• Which of the following is an inaccurate statement specific to private student loans? A. There is no loan forgiveness for careers in public service. B. Income-based repayment options are available. C. Loans may not be discharged upon the borrower's death
• A requirement for a security to be classified as held-to-maturity is (a) ability to hold the security to maturity. (b) positive intent. (c) the security must be a debt security. (d) All of these are required.
• Which of the following statements about the characteristics of debt and equities is true? A) They can both be long-term financial instruments. B) Bond holders are residual claimants. C) The income from bonds is typically more variable than that from equit
• In a troubled debt restructuring where the debtor elects to transfer an equity interest to a creditor in exchange for the satisfaction of an outstanding debt: a) any difference between market value o
• Choose the answer that provides the best definition for the following statement. Theory under which a partnership s recourse debt is shared among the partners A) Qualified business income deduction B) Outside basis C) Guaranteed payment D) Economic risk o
• The materiality constraint, as applied to bad debts: a. Requires use of the direct write off method. b. Requires use of the allowance method for bad debts. c. Permits the use of the direct write of
• Banks hold excess and secondary reserves to: A) reduce the interest-rate risk problem. B) provide for deposit outflows. C) satisfy margin requirements. D) achieve higher earnings than they can with loans.
• The Depository Institutions Deregulation and Monetary Control Act of 1980: A) restricted thrift institutions to making loans for home mortgages. B) restricted the use of ATS accounts. C) imposed restrictive interest-rate ceilings on large agricultural
• Money is defined as: A) bills of exchange. B) anything that is generally accepted in payment for goods and services or in the repayment of debt. C) a risk-free repository of spending power. D) the unrecognized liability of governments.
• Which of the following is not a source of borrowings for a bank? A) Federal funds. B) Eurodollars. C) Transaction deposits. D) Discount loans.
• Classify each of the following items by choosing among the options provided: a. Estimated liability b. Contingent liability c. Current liability that is neither a nor b __________ 1. A lawsuit ag
• Banks that actively manage liabilities will most likely meet a reserve shortfall by: A) calling in loans. B) borrowing federal funds. C) selling municipal bonds. D) seeking new deposits.
• An essential characteristic of credit unions is that: A) they are typically large. B) branching across state lines is prohibited. C) their lending is primarily for mortgage loans. D) they are organized for individuals with a common bond.
• The ability of a business to pay its debts as they come due is referred to as the factor of: a. Leverage. b. Profitability. c. Wealth. d. Solvency.
• Why are the rules under Section 108 Discharge of Debt beneficial? Would you use the election for property base adjustment and if so what kind of property would you choose for the adjustment and why?.
• What is estimated liability: Choose the correct answer. 1. Is an unknown liability of a certain amount. 2. Is a known obligation of an uncertain amount that can be reasonably estimated. 3. Is a liabil
• Determine whether the following is a condition that must exist for a transaction to be considered a troubled debt restructuring or not: Creditors accept stock or subordinated debt as payment in full.
• Which one of the following is an unsecured liability with priority in a Chapter 7 bankruptcy? Select one: A. Compensation owed to employees for services rendered 7 months ago B. $20,000 of a $100,000 loan secured with the property having a fair value of
• Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. Should you borrow on a long-term or a short-term basis? Explain.
• High net worth helps to diminish the problem of moral hazard problem by? A) requiring the state to verify the debt contract. B) collateralizing the debt contract. C) making the debt contract incentive compatible. D) giving the debt contract characteris
• Under troubled debt restructuring, when a creditor's restructured measurement of a loan is less than the current carrying value of the loan (before restructuring] they will record a(n): A. extraordinary loss, net of tax B. bad debt loss C. contra-accou
• Differentiate between the two categories of liabilities (i.e. fully secured and partially secured) that have priority in business liquidation.
• An estimated liability: a) is an unknown liability of a certain amount b) is a known obligation of an uncertain amount that can be reasonably estimated c) is a liability that may occur if a future event occurs d) is not recorded until the amount is known
• The party making the promise to pay the promissory note is the; a. payee. b. maker. c. lender. d. None of these choices are correct.
• Which of the following statements is correct with respect to a limited partnership? a. A limited partner may not be an unsecured creditor of the limited partnership. b. A general partner may not also be a limited partner at the same time. c. A general
• Of the following, which would be the first choice for a bank facing a reserve deficiency? A) Call in loans B) Borrow from the Fed C) Sell securities D) Borrow from other banks
• What is generally the largest source of short-term credit for small firms? a. Trade credit b. Commercial paper c. Bank loans d. Installment loans
• A contingent liability ______. (a) is always of a specific amount (b) is a potential obligation that depends on a future event arising out of a past transaction or event (c) is an obligation not requiring future payment (d) is an obligation arising from t
• Enter the amount of income Marvin must recognize for each scenario that follows. |Marvin owes Central State Bank $80,000. The bank agrees to reduce the debt to $60,000. Prior to the debt reduction, M
• A firm can create future income by temporarily increasing its bad debt allowance. Is this correct?
• Of the following sources of external finance for American nonfinancial businesses, the least important is: A) loans from banks. B) stocks. C) bonds and commercial paper. D) loans from other financial intermediaries.
• Under IFRS, obligations related to warranties are considered: (a) contingent liabilities. (b) provisions. (c) possible obligations. (d) None of these.
• When a maker of a note does not pay at maturity it is called: A. defaulting on a note B. dishonoring a note C. both A and B D. neither A nor B
• The party that issues a promissory note is known as the: A. lender. B. maker. C. borrower. D. both B and C.
• Which is the most important category of Fed assets? A) Securities B) Discount loans C) Gold and SDR certificates D) Cash items in the process of collection
• Select the item that does not relate to fraud risk factors associated with debt obligations. a. Covenants violations are not properly disclosed. b. Options are backdated. c. Long term or short-term misclassifications. d. Long term or short term author
• Under troubled debt restructuring, when a creditor's restructured measurement of loan is less than the current carving value of the loan (before restructuring) they will record a(n) A. extraordinary loss, net of tax B. bad debt loss C. contra-account t
• Some financial instruments can have both debt and equity features. The most common example is convertible debt (bonds or notes convertible by the investor into common stock). A topic of debate for sev
• Credit terms are terms for: a. when the payments for merchandise are to be made b. when the returns of merchandise are to be made c. Both of these choices are correct. d. None of these choices are correct.
• At its inception, the Federal Reserve was intended to be: A) the Treasury's banker. B) the issuer of government debt. C) a lender-of-last-resort. D) a regulator of bank holding companies.
• In emerging economies, government fiscal imbalances may cause fears of: A) debt deflation. B) default on government debt. C) stock price declines. D) lower interest rates.
• The major assets of savings and loans are ________. a. Mortgage-backed securities b. Construction loans c. Residential mortgages d. Cash and investment accounts.
• Which of the following credits is not part of the general business credit? a) Rehabilitation credit b) Disabled access credit c) Work opportunity tax credit d) Employer-provided childcare credit e) All of the above credits are part of the general bus
• A US citizen and a British citizen are joint debtors on a loan from a US person. The British citizen pays all the interest this year. What is the source of the interest income to the US person? Please refer to US Code and regulations: Code Secion 861(a)(1
• When the debtor has defaulted on its obligation, the creditor is entitled to recover from the surety unless which of the following is present? A) The surety is in the process of exercising its rights of exoneration against the debtor. B) The debtor had di
• Which of the following characteristics is unique to governments? a) The ability to have activities financed with tax-exempt debt. b) The power to impose fees. c) The ability to issue tax-exempt debt. d) The ability to have activities financed by Feder
• Which of the following are NOT part of the 5Cs of credit? Select ALL applicable. a. Conditions. b. Collateral. c. Candor. d. Character. e. Commitment.
• If the Fed decides to reduce bank reserves, it can: A) purchase government bonds. B) extend discount loans to banks. C) sell government bonds. D) print more currency.
• What is the difference between provision for possible loan losses (bad debt expense) and allowance for possible loan losses (bad debt reserve) accounts? What is the relationship between them?
• Calculate the real deficit or surplus in the following cases: a. Inflation is 11 percent. Debt is $1 trillion. Nominal deficit is $90 billion. Instructions: Round your answer to the nearest whole do
• Which of the following is an amendment to a financial statement that states that the debtor has no obligation to the secured party? a. An ending statement. b. A termination statement. c. A bind-up statement. d. A release statement. e. A reversion statemen
• Which of the following items would be excluded from income? (a) $100 bill found under the sugar caddy at the restaurant (b) Inheritance of a car from your grandmother valued at $5,000. (c) Loan fro
• Which of the following instruments are traded in a money market? A) Bank commercial loans. B) Commercial paper. C) State and local government bonds. D) Residential mortgages.
• Home mortgage lending is heavily regulated by federal laws. Is this a result of Congressional pandering to consumer groups, or are there good reasons why home mortgage lending should be regulated more than, say, automobile financing? Explain.
• Loans past due 90 days or more and loans that are not accruing interest because of problems of the borrower are called: a. loan losses b. net charge-offs c. provisional loans d. non-current loans e. contra loans
• List the two approaches to examining a firm's long-term debt-paying ability. Discuss why each of these approaches gives an important view of a firm's ability to carry debt.
• Which of the following is an amendment to a financing statement that states that the debtor has no obligation to the secured party? a. An ending statement. b. A termination statement. c. A bind-up
• Whatever a society uses as money, the distinguishing characteristic is that it must: A) be completely inflation-proof. B) be generally accepted as payment for goods and services or in the repayment of debt. C) contain gold. D) be produced by the gover
• What are the two basic ways in which funds flow through the financial system from lender-savers to borrower-spenders?
• Determine the term being defined by the following statement: The availability of resources to meet short-term obligations and to efficiently generate revenues. Choose from the following choices: | Market prospects | Financial statement analysis | Debt-t
• 1. Which of the following is the starting point of the master budget? A.The fuss budget B.The financial budget C.The capital budget D.The operating budget 2. Which of the following is part of t
• In debt-oriented countries companies tend to: a. fear that the market will punish poor performance numbers b. underreport earnings c. make their numbers as positive as possible d. both a and c
• Which of the following is not listed in AASB 101 to determine if a liability should be classified as current? a. If the liability is guaranteed to be settled within 12 months. b. If the liability is held primarily for the purpose of being traded. c. If th