If a Bank Has Assets of $5 Billion and Liabilities

question 32

Multiple Choice

If a bank has assets of $5 billion and liabilities of $4.8 billion:

• A) its equity equals $200 million.
• B) its equity equals -$800 million.
• C) it faces a solvency crisis.
• D) its equity equals -$800 million and it faces a solvency crisis.

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Definitions:

Current Tax Liability

The amount of taxes due to be paid to the taxing authorities within the next financial period, typically within one year.

Accounting Profit

The difference between accounting revenues earned and accounting expenses incurred.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.

Long Service Leave

An employee benefit that provides paid leave for long-term service, specific to certain countries like Australia.