Banks Attempt to Screen Good Credit Risks from Bad to Reduce

question 58

Multiple Choice

Banks attempt to screen good credit risks from bad to reduce the incidence of loan defaults.To do this,banks

• A) specialize in lending to certain industries or regions.
• B) write restrictive covenants into loan contracts.
• C) expend resources to acquire accurate credit histories of their potential loan customers.
• D) do all of the above.

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Definitions:

Subsidiary Ledger

A detailed ledger supporting a general ledger, containing information on individual accounts like customers or suppliers.

Issued Check

A check that has been written, signed, and released by the drawer but not yet cleared through the banking system.

Advertising Expense

This is the cost associated with promoting products or services to generate sales and increase brand awareness, including media buys, creative costs, and advertising staff salaries.

Cash Receipts

The collection of money (currency, checks, or electronic transfers) by a business from its customers, either for the sale of goods or services or from other sources like investments.