Choose the Statement That Is Incorrect

question 71

Multiple Choice

Choose the statement that is incorrect.

• A)A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed.
• B)Insolvency and illiquidity were at the core of a global financial meltdown in 2007- 2008.
• C)A financial institution can be solvent but illiquid.
• D)If a financial institution's net worth is negative, the institution is solvent.
• E)A firm is illiquid if it has made long- term loans with borrowed funds and is faced with a sudden demand to repay more of what is has borrowed than its available cash.

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Definitions:

Profit

The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activity.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts and/or the physical factors of production including machinery and buildings.

Resource Owners

Individuals or entities that hold legal rights or control over natural, human, or capital resources, enabling them to use or allocate them.

Wind Farms

Areas equipped with large numbers of wind turbines used to generate electricity.