1. When reviewing a Form 4562, what information will a lender learn about the business?

A. The amount of any capital gains tax payments.

B. The amount of proceeds received from used equipment sales.

C. The amount of proceeds from securities sales.

D. The amount of any fixed asset purchases.

2. Which of the following would be the primary objective of a negative covenant in a loan agreement?

A. To enable early detection of financial deterioration.

B. To establish a means of communication with a borrower.

C. To preserve cash flows for debt repayment.

D. To provide assurance that a loan will be repaid.

3. Roses Posies is a local florist with several locations in the county. You met the owner recently and she has asked to speak to you about a potential loan request. Which of the following would be the most typical type of loan this company would require?

A. A term loan to acquire capital assets.

B. A revolving credit to fund long-term sales growth.

C. A mortgage loan to acquire one of the store locations.

D. A seasonal line to fund inventory build-up.

4. Which of the following actions is most likely to negatively impact an individuals credit score?

A. Paying off the balance on a revolving card instead of making monthly payments.

B. Underutilization of a home equity line of credit.

C. Closing out a well-established credit card account with good payment history.

D. Applying for a new auto loan every five years.

5. In estimating cash flow, which of the following steps are taken?

A. Add capital gains and deduct capital losses.

B. Deduct depreciation and amortization.

C. Add distributions from partnerships.

D. Add income from S corporations.

6. Tax law provides for a variety of deductions that can be used by businesses or their owners (if the business is taxed at the ownership level). Which of the following deductions would be available only to C corporations and not to S corporations, partnerships, LLCs and their owners?

A. Domestic production activities deduction.

B. Net operating loss carryforwards.

C. Dividends received deduction.

D. Section 179 expense deduction.

7. Where is a lender most likely to look for evidence of a fraud in financial statements received from a borrower in support of a loan request?

A. Understating the balance of receivables.

B. Overstating payables owed to the trade.

C. Including contingent sales in revenues.

D. Accelerating recognition of expenses.

8. Which type of entity is potentially subject to a "built-in gains tax"?

A. C corporation

B. S corporation

C. General partnership

D. Limited liability company

9. Which business entity exposes an owner to potential liability for business obligations?

A. C corporation

B. S corporation

C. General partnership

D. Limited liability company

10. When developing the structure of a loan, which of the following are least critical to consider?

A. The cash flow and collateral available for repayment.

B. The customers sensitivity to pricing and restrictive covenants.

C. The need to meet a much lower rate offered by a competitor.

D. The type of loan offered based on the loan purpose.