An FI Is Exposed to Liquidity Risk Because the Average

question 45

True/False

An FI is exposed to liquidity risk because the average maturity of assets and the average maturity of liabilities are often different on the FIs balance sheet.

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Definitions:

Accumulated Depreciation

The aggregate depreciation cost allocated to a fixed asset since its initial purchase.

Commercial Substance

A financial concept indicating that a transaction significantly changes the economic position or cash flows of the entity.

Equipment Ledger

A detailed record that tracks the acquisition, depreciation, and disposal of equipment owned by a business.

Commercial Substance

A situation where a transaction causes a significant change to the future cash flows of a company.