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I’m Christina deocampo and I am assign to discuss the three main types of finance companies and
the nature of commercial bank’s asset.
No. 12 Give and explain briefly the three main types of finance companies
The first three main types of finance companies are the consumer finance companies or CFCs
Explanation: the consumer finance companies is a non-bank company that encourages the customer to
increase their spending habit by providing them a loan. This allows the companies to increase their sales
and conversions rate while promoting customer loyalty and repeat business. Common examples of CFCs
are home credit, Toyota financial services (and other auto manufactures service providers for consumers
purchasing vehicles, and automobile finance companies)
Business or commercial finance companies provide loans to both small and large enterprises, typically to
help them pay for new equipment or other significant upgrades.
Explanation: Also known as acceptance companies. With a few significant differences, these finance
organizations provide services to businesses in the same way as direct-loan companies provide services
to individuals. Borrowers from sales finance companies are often major corporations with excellent credit
ratings. A huge firm does not require to put up collateral to secure a loan. Furthermore, these businesses
frequently receive higher interest rates than they would from a bank.
Moving on to the next chapter, Hi! I’m Christina deocampo and I will discuss the first question from the
chapter 13: the basics of commercial banking
For chapter 13 no. 2 give and explain the nature of a commercial bank’s assets
(read the answer) and explain its nature and its primary examples of bank’s assets
Explanation: A commercial bank are the most important financial intermediary that provides liquidity by
bridging sources of capital from depositors and creating credit that can be extended to borrowers. To do
so, they offer a wide variety of business-centric products and services. They are critical to any economy
that relies on business credit and its creation. The following are the most important bank’s asset
Reserves and Other Cash Assets – It is the most liquid asset that banks have, consisting of vault cash or
deposits with another bank, as well as deposits with the Central Bank. Reserves that banks hold over and
above those that are required are called excess reserves.
Securities - These are liquid assets traded in financial markets by banks. Banks are authorized to hold
government-issued securities.
Loans Receivable – It is the most important type of bank asset. Loans are less liquid than marketable
securities and have higher risk and information costs. As a result, banks' interest rates on loans are
greater than those on marketable assets.
Other Assets – it includes bank financial assets such as computer equipment, buildings, and collateral
acquired from defaulting debtors