FICEP CUNA UPDATED QUESTIONS AND SOLUTIONS
GUARANTEE A+
✔✔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)
✔✔Which building blocks of accounting are reported on the income statement -
✔✔Revenue and Expenses
✔✔What ratios are considered "universal ratios" - ✔✔capital to assets(net worth), loan
to share, spread analysis with ROA, delinquency and charge offs
✔✔What is the purpose of Capital - ✔✔Insure safety and soundness, sustained growth,
rainy day fund and the ability to take calculated risks
✔✔what are the most important sources of revenue - ✔✔interest income/non interest
income
✔✔what is the most common measure of profitability in credit unions - ✔✔ROA (return
on assets)
, ✔✔What ratio measures how efficiently deposits are turned into loans - ✔✔net interest
margin
✔✔Which ratio identifies how many cents it costs to earn $1 in revenue - ✔✔Efficiency
ratio
✔✔Definition of spread analysis - ✔✔measure of profitability and how it was attained
✔✔Definition of ROA (return on assets) - ✔✔Short term profitability
✔✔Definition of Capital to assets ratio - ✔✔long term stability
✔✔What are the 5 universal ratios - ✔✔Net Wort (capital), loan to share, spread
analysis with ROA, Delinquency and Net charge off
✔✔What does Capital Risk measure - ✔✔the risk of insolvency (assets less liabilities)
and failure
✔✔What will increase asset utilization - ✔✔Increase credit risk
✔✔What must grow at the same speed - ✔✔Assets and Capital
✔✔Definition of ROE (return on equity) - ✔✔Sustainable asset growth rate
✔✔Definition of liquidity Risk - ✔✔Maintaining an adequate availability of funds (for loan
demand, deposit flows and expense payments in a changing interest rate environment
✔✔What should you do if you expect interest rates to decrease in the future -
✔✔Originate more fixed rate loans (consumer and syndicated) more long term
investments (series B Munis, 5 Year treasuries) and issue more short term liabilities ( 3
month CD's). This will lead to more liabilities repricing than assets -This is called
"negative GAP"
✔✔What should you do if you expect interest rates to increase in the future -
✔✔Originate more adjustable-rate loans (commercial loans, ARMS) today an. T Bills)
Issue more fixed rate liabilities (1 yr CDs) this will lead to more assets repricing than
liabilities or what is known as "positive GAP"
✔✔Definition of Positive GAP - ✔✔More assets repricing than liabilities
✔✔Definition of Negative GAP - ✔✔more liabilities repricing than assets
✔✔What ratio measures how efficiently deposits are turned into loans - ✔✔Loan to
share ratio
GUARANTEE A+
✔✔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)
✔✔Which building blocks of accounting are reported on the income statement -
✔✔Revenue and Expenses
✔✔What ratios are considered "universal ratios" - ✔✔capital to assets(net worth), loan
to share, spread analysis with ROA, delinquency and charge offs
✔✔What is the purpose of Capital - ✔✔Insure safety and soundness, sustained growth,
rainy day fund and the ability to take calculated risks
✔✔what are the most important sources of revenue - ✔✔interest income/non interest
income
✔✔what is the most common measure of profitability in credit unions - ✔✔ROA (return
on assets)
, ✔✔What ratio measures how efficiently deposits are turned into loans - ✔✔net interest
margin
✔✔Which ratio identifies how many cents it costs to earn $1 in revenue - ✔✔Efficiency
ratio
✔✔Definition of spread analysis - ✔✔measure of profitability and how it was attained
✔✔Definition of ROA (return on assets) - ✔✔Short term profitability
✔✔Definition of Capital to assets ratio - ✔✔long term stability
✔✔What are the 5 universal ratios - ✔✔Net Wort (capital), loan to share, spread
analysis with ROA, Delinquency and Net charge off
✔✔What does Capital Risk measure - ✔✔the risk of insolvency (assets less liabilities)
and failure
✔✔What will increase asset utilization - ✔✔Increase credit risk
✔✔What must grow at the same speed - ✔✔Assets and Capital
✔✔Definition of ROE (return on equity) - ✔✔Sustainable asset growth rate
✔✔Definition of liquidity Risk - ✔✔Maintaining an adequate availability of funds (for loan
demand, deposit flows and expense payments in a changing interest rate environment
✔✔What should you do if you expect interest rates to decrease in the future -
✔✔Originate more fixed rate loans (consumer and syndicated) more long term
investments (series B Munis, 5 Year treasuries) and issue more short term liabilities ( 3
month CD's). This will lead to more liabilities repricing than assets -This is called
"negative GAP"
✔✔What should you do if you expect interest rates to increase in the future -
✔✔Originate more adjustable-rate loans (commercial loans, ARMS) today an. T Bills)
Issue more fixed rate liabilities (1 yr CDs) this will lead to more assets repricing than
liabilities or what is known as "positive GAP"
✔✔Definition of Positive GAP - ✔✔More assets repricing than liabilities
✔✔Definition of Negative GAP - ✔✔more liabilities repricing than assets
✔✔What ratio measures how efficiently deposits are turned into loans - ✔✔Loan to
share ratio
