The Prompt Corrective Action Rule Implemented by the FDICIA Directed

question 23

Multiple Choice

The prompt corrective action rule implemented by the FDICIA directed the FDIC to

• A)shut down institutions when their net worth became negative.
• B)shut down institutions when their net worth is less than 2% of assets.
• C)encourage institutions to reform the management of their assets in lieu of shutting down.
• D)use its best judgment in responding to insolvent institutions.

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Definitions:

Working Capital

The disparity between an organization's immediate assets and liabilities, revealing its short-term fiscal stability and operational effectiveness.

Short-Term Liabilities

Financial obligations of a business that are due to be paid within one year.

Spontaneously

Occurring without external cause, acting or done impulsively and without premeditation.

Firm's Operations

The day-to-day activities involved in running a business, including production, marketing, and sales functions.