A Bank That Wants to Monitor the Check Payment Practices

question 32

Multiple Choice

A bank that wants to monitor the check payment practices of its commercial borrowers,so that moral hazard can be prevented,will require borrowers to

• A) place a bank officer on their board of directors.
• B) place a corporate officer on the bank's board of directors.
• C) keep compensating balances in a checking account at the bank.
• D) do all of the above.
• E) do only A and B of the above.

---

Definitions:

Administrative Salaries

Expenses related to the salaries of employees who perform general administrative duties not directly tied to production or sales.

Interest

The cost paid for borrowing money, typically expressed as a percentage of the total borrowed.

JIT Policy

Just-In-Time policy, a strategy where materials are produced or acquired only as needed for use in the production process, reducing inventory levels.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated through a physical count or accounting methods.