$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$ -The Above Table Gives the Initial Balance Sheet for Mini

question 371

Multiple Choice

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}\hline \text { Reserves } & \$ 100 &\text { Deposits }&\$400\\\text { Loans } & 600 &\text { Net worth }&\$300\\\text { Total assets } & \$ 700&\text { Total assets }&\$700 \\\hline\end{array}$
-The above table gives the initial balance sheet for Mini Bank. Mini Bank?s balance sheet is such that it will make

• A) you cannot predict what the bank will do from this balance sheet.
• B) more loans.
• C) no change in its lending.
• D) fewer loans.

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Definitions:

Paid-in Capital

The sum of funds a business has obtained from its stockholders by selling them stock shares.

Par Value

A nominal value assigned to a share of stock in the charter of a corporation, which does not necessarily reflect its market value.

Common Stock

Equity securities representing ownership in a corporation, providing voting rights, and a dividend claim on earnings.

Cumulative Nonparticipating Preferred Stock

Preferred stock that accumulates unpaid dividends, which must be paid out before dividends can be distributed to common stockholders, but does not participate beyond the fixed dividend.