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Question 1 of 10
1. Question
Which of the following describes a subordinated loan?
I. It is an unsecured loan that ranks below with respect to claims on assets or earnings.
II. It is an unsecured bond that ranks below with respect to claims on assets or earnings.
III. It is also known as subordinated debentures.
IV. It is the same with senior debt or senior loans.Correct
A subordinated loan is also known as subordinated debentures, thus may also be similar to junior securities. It refers to unsecured loan or bonds with respect to claims on assets or earnings that ranks below senior loans or securities. It is different from senior loans because a subordinated loan carries higher interest rates during payback compared to the senior loans.
Incorrect
A subordinated loan is also known as subordinated debentures, thus may also be similar to junior securities. It refers to unsecured loan or bonds with respect to claims on assets or earnings that ranks below senior loans or securities. It is different from senior loans because a subordinated loan carries higher interest rates during payback compared to the senior loans.
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Question 2 of 10
2. Question
Which of the following are considered a subordinated loan?
I. Preferred equity
II. Asset-backed securities
III. Mezzanine debt
IV. Convertible bondsCorrect
An asset-backed securities and mezzanine debts are considered a subordinated loan because their debt also includes an investment. Some tranches of asset-backed securities generally have subordinated features. Asset-backed securities are collateralized securities through assets, loans, leases, credit card debt, royalties, or receivables.
Incorrect
An asset-backed securities and mezzanine debts are considered a subordinated loan because their debt also includes an investment. Some tranches of asset-backed securities generally have subordinated features. Asset-backed securities are collateralized securities through assets, loans, leases, credit card debt, royalties, or receivables.
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Question 3 of 10
3. Question
Which of the following are features of subordinated loans?
I. Shorter repayment periods
II. Higher closing cost and points
III. Have excessive fees
IV. Lesser operating fees are chargedCorrect
Subordinated loans have shorter repayment periods, higher closing costs, and excessive fees. A value of a subordinated loan shall be based on the secured asset. Its value shall be able to pay sufficiently both primary and subordinated debt. As compared to primary debt, subordinated loans have higher interest rates due to their additional risks to the lender.
Incorrect
Subordinated loans have shorter repayment periods, higher closing costs, and excessive fees. A value of a subordinated loan shall be based on the secured asset. Its value shall be able to pay sufficiently both primary and subordinated debt. As compared to primary debt, subordinated loans have higher interest rates due to their additional risks to the lender.
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Question 4 of 10
4. Question
When must a subordination agreement be done by a lender and a borrower?
Correct
A subordination agreement is done when the lenders are favorable to subordinate their loans to permit the business in adding short-term financing needed in buying products. A subordination agreement is written and signed by the lender. This usually happens when a business financed their inventory or accounts receivables in identifying their opportunities to buy a product at a discount.
Incorrect
A subordination agreement is done when the lenders are favorable to subordinate their loans to permit the business in adding short-term financing needed in buying products. A subordination agreement is written and signed by the lender. This usually happens when a business financed their inventory or accounts receivables in identifying their opportunities to buy a product at a discount.
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Question 5 of 10
5. Question
In what category shall a subordinated debt fall on a balance sheet?
Correct
A subordinated debt shall be recorded on a balance sheet treated as a long-term liability. It is recorded under or after the unsubordinated debts. A subordinated debt are usually debts that are repaid after senior debtors are repaid in full.
Incorrect
A subordinated debt shall be recorded on a balance sheet treated as a long-term liability. It is recorded under or after the unsubordinated debts. A subordinated debt are usually debts that are repaid after senior debtors are repaid in full.
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Question 6 of 10
6. Question
In which of the following situations do subordinated loans arise?
Correct
A subordinated loan arises when a business becomes insolvent. A business must pay off its liabilities to the creditors first before distributing the losses from themselves. A firm’s debts are ranked from which debt shall be paid first or shall be prioritized. A subordinate debts are paid only after senior debts are cleared in the business’s liquidation.
Incorrect
A subordinated loan arises when a business becomes insolvent. A business must pay off its liabilities to the creditors first before distributing the losses from themselves. A firm’s debts are ranked from which debt shall be paid first or shall be prioritized. A subordinate debts are paid only after senior debts are cleared in the business’s liquidation.
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Question 7 of 10
7. Question
Under the SEA Rule 17a-5, which of the following does a compliance report consist of?
I. A description of each material weakness in Internal Control Over Compliance of the broker or dealer
II. A description of any instance of non-compliance with SEA Rule 15c3-3
III. A statement regarding the effectivity of the Internal Control Over Compliance of the broker or dealer
IV. A statement on how the broker-dealer became in charged with the Internal Control Over ComplianceCorrect
All of the statements mentioned above are required in filing a compliance report, except the statement on how the broker-dealer became in charge of the Internal Control Over Compliance. Statements in a compliance report are more on the effectivity of the Internal Control Over Compliance of a broker or dealer within the end of the most recent fiscal year. It must also provided statements as to where it was derived from the books and records.
Incorrect
All of the statements mentioned above are required in filing a compliance report, except the statement on how the broker-dealer became in charge of the Internal Control Over Compliance. Statements in a compliance report are more on the effectivity of the Internal Control Over Compliance of a broker or dealer within the end of the most recent fiscal year. It must also provided statements as to where it was derived from the books and records.
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Question 8 of 10
8. Question
Which of the following is an internal control that has the objective to provide the broker or dealer with reasonable assurance in preventing or detecting statements on a timely basis?
Correct
Internal control over compliance provides reasonable assurance to the broker or dealer that non-compliance with a designated examining authority’s rules will be prevented or detected. This is a requirement in the annual compliance reports under SEA Rule 17a-5.
Incorrect
Internal control over compliance provides reasonable assurance to the broker or dealer that non-compliance with a designated examining authority’s rules will be prevented or detected. This is a requirement in the annual compliance reports under SEA Rule 17a-5.
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Question 9 of 10
9. Question
Which of the following refers to an entry made in the books of accounts regarding the revenue or expense paid without any exchange of cash?
Correct
Accrual refers to entries in the books of accounts regarding the payment of revenues or expenses without any exchange of cash. It is the accumulation or increase in payments of benefits over time. In accrual, work has already been done but not yet invoiced and its provision is made at the end of the accounting period.
Incorrect
Accrual refers to entries in the books of accounts regarding the payment of revenues or expenses without any exchange of cash. It is the accumulation or increase in payments of benefits over time. In accrual, work has already been done but not yet invoiced and its provision is made at the end of the accounting period.
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Question 10 of 10
10. Question
Which of the following refers to accruals?
I. A revenue that shall be reported now but not yet recorded or received
II. A revenue that shall be recorded or received but not yet reported
III. An expense that shall be reported now but not yet recorded or paid
IV. An expense that shall be recorded or paid but not yet reportedCorrect
Accruals refer to revenues and expenses that shall be reported now but not yet recorded, paid, or received. Accrual accounting is used to easily allow business owners to see if the company is profitable. It also tracks the profit that is coming in and expenses that are coming out. It matches revenues with the expenses incurred in producing such revenue.
Incorrect
Accruals refer to revenues and expenses that shall be reported now but not yet recorded, paid, or received. Accrual accounting is used to easily allow business owners to see if the company is profitable. It also tracks the profit that is coming in and expenses that are coming out. It matches revenues with the expenses incurred in producing such revenue.