A Bank Has a Long-Term Relationship with a Particular Business

question 33

Multiple Choice

A bank has a long-term relationship with a particular business customer.However,recently the bank has become concerned because of a potential deterioration in the customer's income.In addition,regulators have expressed concerns about the bank's capital position.The business customer has asked for a renewal of its $25 million dollar loan with the bank.Which of the following can be used to help this situation?

• A)Standby letter of credit
• B)Loan sale
• C)Loan securitization
• D)Credit risk option
• E)Credit-linked notes

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Definitions:

Debited

An accounting term describing an entry that increases an asset or expense account, or decreases a liability or equity account.

Allowance for Doubtful Accounts

An estimate of the amount of accounts receivable that may not be collectible.

Bad Debts Expense

Represents the recognition of accounts receivable that a company is unable to collect, treated as an expense in the income statement.

Uncollectible Accounts

Uncollectible Accounts are receivables that cannot be collected from customers, often written off as a bad debt expense.