FINC 412 CH 22

____ finance companies concentrate on purchasing credit contracts from retailers and dealers. Consumer
Which of the following is not a source of finance company funds to support operations? federal funds
When a finance company’s assets are ____ interest rate sensitive than its liabilities and when interest rates are expected to ____, bonds can provide longterm financing at a rate that is completely insulated from rising market rates. less; increase
Finance companies differ from commercial banks, savings institutions, and credit unions in that they normally do not obtain funds from deposits.
Which of the following is not a main source of funds for finance companies? capital
Finance companies are more likely to issue bonds when their assets are presently ___ interest rate sensitive than their liabilities, and when interest rates are expected to ____. less; increase
If finance companies were confident about projections of ____ interest rates, they may consider using the funds obtained from issuing bonds to offer loans with ____ rates. rising; variable
Finance companies would prefer to increase their longterm debt most once interest rates have declined.
The main competition for finance companies in the consumer loan market comes from commercial banks and savings and institutions.
When finance companies purchase a firm’s receivables at a discount, and are responsible for processing and collecting the balances of these accounts, they act as a factor.
When a finance company purchases equipment for use by another business, the finance company provides financing in the form of leasing.
Finance companies are subject to ceiling interest rates on loans provided.
If finance companies with a greater ratesensitivity of liabilities than assets wanted to reduce interestrate risk, they could shorten their average asset life.
Compared to other lending financial institutions, finance companies have a ____ loan delinquency rate, and the average rate charged on loans is ____ on average. higher; higher
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 captive finance subsidiary.
Which of the following statements is incorrect? a. A captive finance subsidiary’s purpose is to finance sales of the parent company’s productsand services.b. An operating agreement between the parent and the captive specifies the type of receivablesthat qualify for same and specific services provided by the parent.c. A captive can be used to finance distributor or dealer inventories until a sale occurs.*d. A captive is rarely used to finance products leased to others.*
____ provide loans to firms that cannot obtain financing from commercial banks. Commercial finance companies
Which of the following is not a use of finance company funds? commercial paper
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 these accounts. factors
Most finance companies are commonly exposed to all forms of risk below except ____ risk. exchange rate
Changes in economic growth are ____ related to a finance company’s cash flows, and changes in the risk free rate are ____ related to a finance company’s cash flows. positively; negatively
Finance companies participate in the ____ market to reduce interest rate risk. swap
The most important risk for finance companies is ____ risk. credit
Finance companies can accumulate capital by doing all of the following except issuing commercial paper.
Consumer finance companies primarily focus on for consumer loans.
Historically, captive finance subsidiaries were associated with: the automobile industry.

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