If IR = Interest Received on Assets, IP = Interest

question 65

Multiple Choice

If IR = interest received on assets, IP = interest paid on liabilities, and TA = total assets, then the bank's interest rate margin is defined as:

• A) IR + IP.
• B) IR - IP.
• C) (IR - IP)/ TP.
• D) (IR + IP)/ TP.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets such as cash, marketable securities, and accounts receivable.

Quick Ratio

A metric to evaluate a company's short-term liquidity position, calculated by dividing liquid assets by current liabilities.