FICEP CUNA UPDATED STUDY GUIDE QUESTIONS AND
SOLUTIONS GUARANTEE A+
✔✔gross revenue is divided in to what 4 categories - ✔✔operating expenses, provision
for loan loss, interest expense and income
✔✔Definitions of endogenous - ✔✔internal factors that can be controlled
✔✔definition of exogenous - ✔✔external factors that cannot be controlled
✔✔What is the ratio composition for Profit Margin - ✔✔R/GR
✔✔What is the ratio composition for Return on Equity - ✔✔R/E
✔✔What should every business decision do - ✔✔evaluate the relevant additional cost
and additional benefits
✔✔What is the virtuous cycle of banking - ✔✔faster asset growth, economies of scale,
higher profit margin, higher return on assets, higher return on equity (self reinforcing
spiral, feedback loop)
✔✔What does the "Valve" stand for in the tub analogy - ✔✔provision for loan loss
✔✔What is in the tub in the tub analogy - ✔✔allowance for loan losses
✔✔What is the drain stand for in the tub analogy - ✔✔charge offs
✔✔What are the three major goals of financial institutions - ✔✔safety and soundness,
competitiveness and economic viability
✔✔Todays yield curve is being shifted due to what - ✔✔the euro zone debt crisis, the
federal reserves quantitative easing program and the treasury issuing large amounts of
bonds to fund federal deficient
✔✔when measuring the credit risk of potential borrowers, lenders use what? -
✔✔Experian, Equifax and Transunion
✔✔What is the ratio composition for Leverage - ✔✔A/E
✔✔What is the ratio composition of asset utilization - ✔✔GR/A
✔✔What is the ratio composition of Return on assets - ✔✔R/A
✔✔What does the "R" mean in ratios - ✔✔Return (net Income )
, ✔✔What does the "E" mean in ratios - ✔✔Equity (reserves + undivided earnings)
beginning of period
✔✔What does the "A" mean in ratios - ✔✔Assets (beginning of period)
✔✔What does "GR" mean in ratios - ✔✔Gross revenue (interest income = non interest
income)
✔✔What is the denominator of profit margin ratio - ✔✔Gross income
✔✔What is the job description of CEO - ✔✔monitor overall performance, monitor
competition, determine net interest margin strategy
✔✔What is the job description of Funding Officer - ✔✔determine funding strategy,
determine quantity and maturity of CD's, set service charge fee's and credits
✔✔What is the job description for Loan Officer - ✔✔Set loan interest rates, set credit
policies, determine real estate loan sales
✔✔What is the job description of human resource officer - ✔✔determine salary policy,
set percent allocation of officer effort, determine the opening and closing of branches
✔✔ What is Economics? - ✔✔The study of the confusion between stocks (balance
sheets)and flows (income statement)
✔✔What are the building blocks on the balance sheet? - ✔✔Assets, Liabilities and
Capital
✔✔What is spread analysis? (aka net interest margin analysis) - ✔✔Measures
profitability and how it was attained
✔✔What ratio identifies how many cents it costs to earn 1 dollar in revenue? -
✔✔efficiency ratio
✔✔What ratio measures how efficiently deposits are turned into loans? - ✔✔Loan to
Share Ratio
✔✔Most common measure of profitability for a CU - ✔✔Return on Assets
✔✔What is definition of return on assets - ✔✔Short term profitability (how well your
assets are working for you)
SOLUTIONS GUARANTEE A+
✔✔gross revenue is divided in to what 4 categories - ✔✔operating expenses, provision
for loan loss, interest expense and income
✔✔Definitions of endogenous - ✔✔internal factors that can be controlled
✔✔definition of exogenous - ✔✔external factors that cannot be controlled
✔✔What is the ratio composition for Profit Margin - ✔✔R/GR
✔✔What is the ratio composition for Return on Equity - ✔✔R/E
✔✔What should every business decision do - ✔✔evaluate the relevant additional cost
and additional benefits
✔✔What is the virtuous cycle of banking - ✔✔faster asset growth, economies of scale,
higher profit margin, higher return on assets, higher return on equity (self reinforcing
spiral, feedback loop)
✔✔What does the "Valve" stand for in the tub analogy - ✔✔provision for loan loss
✔✔What is in the tub in the tub analogy - ✔✔allowance for loan losses
✔✔What is the drain stand for in the tub analogy - ✔✔charge offs
✔✔What are the three major goals of financial institutions - ✔✔safety and soundness,
competitiveness and economic viability
✔✔Todays yield curve is being shifted due to what - ✔✔the euro zone debt crisis, the
federal reserves quantitative easing program and the treasury issuing large amounts of
bonds to fund federal deficient
✔✔when measuring the credit risk of potential borrowers, lenders use what? -
✔✔Experian, Equifax and Transunion
✔✔What is the ratio composition for Leverage - ✔✔A/E
✔✔What is the ratio composition of asset utilization - ✔✔GR/A
✔✔What is the ratio composition of Return on assets - ✔✔R/A
✔✔What does the "R" mean in ratios - ✔✔Return (net Income )
, ✔✔What does the "E" mean in ratios - ✔✔Equity (reserves + undivided earnings)
beginning of period
✔✔What does the "A" mean in ratios - ✔✔Assets (beginning of period)
✔✔What does "GR" mean in ratios - ✔✔Gross revenue (interest income = non interest
income)
✔✔What is the denominator of profit margin ratio - ✔✔Gross income
✔✔What is the job description of CEO - ✔✔monitor overall performance, monitor
competition, determine net interest margin strategy
✔✔What is the job description of Funding Officer - ✔✔determine funding strategy,
determine quantity and maturity of CD's, set service charge fee's and credits
✔✔What is the job description for Loan Officer - ✔✔Set loan interest rates, set credit
policies, determine real estate loan sales
✔✔What is the job description of human resource officer - ✔✔determine salary policy,
set percent allocation of officer effort, determine the opening and closing of branches
✔✔ What is Economics? - ✔✔The study of the confusion between stocks (balance
sheets)and flows (income statement)
✔✔What are the building blocks on the balance sheet? - ✔✔Assets, Liabilities and
Capital
✔✔What is spread analysis? (aka net interest margin analysis) - ✔✔Measures
profitability and how it was attained
✔✔What ratio identifies how many cents it costs to earn 1 dollar in revenue? -
✔✔efficiency ratio
✔✔What ratio measures how efficiently deposits are turned into loans? - ✔✔Loan to
Share Ratio
✔✔Most common measure of profitability for a CU - ✔✔Return on Assets
✔✔What is definition of return on assets - ✔✔Short term profitability (how well your
assets are working for you)
