Question

Define the following concepts (formula and/or graph may be helpful).

1. Commercial banks vs. farm credit system

2. Loan funding costs vs. loan administration as related to loan pricing and lending

3. Financial feasibility analysis

4. Economic capital

5. Operating vs. capital lease

6. Financial intermediaries

7. Cash flow vs. Equity.

8. Liquidity

Answer 1

As they are individual topics so I will try to answer the first three:

1) Commercial banks - Commercial banks are the full service banks which accepts deposits, make loans and also provide other credit services. They are the retail banks with full customer base.

Farm credit system - These are specifically established with the entire focus on the agriculture sector and making lending to the farm sector, banks such as co operative banks.

2) Loan funding costs - Loan funding costs are the interest costs which is being paid on the loan amount which is being obtained.

Loan administration cost - These are related to processing costs which relates to documentation cost, processing fees.

3) Financial feasibility analysis - it is the analysis of the project to determine if it is financially possible or attractive. Few of the feasibility analysis which can be performed are cost estimates, Return of investment, payback period, net present value etc.