Which of the Following Statements Is True of the Liquidity

question 6

Multiple Choice

Which of the following statements is true of the liquidity of banks?

• A) The more cash banks loan to customers, the lower its profits but the higher its liquidity.
• B) Banks face liquidity problems because they borrow long and lend short.
• C) The more cash a bank keeps in securities, the higher its liquidity and the lower its profits.
• D) In order to increase their liquidity, banks need to purchase government bonds from the

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Definitions:

Fixed Costs

Expenses that remain constant regardless of the amount of production or sales, including rent, salaries, and insurance.

Finished Goods Inventory

The inventory of finished goods available for sale but have not been bought by consumers yet.

Cost Of Goods Manufactured

The total cost incurred by a company to produce goods during a specific period, including costs of materials, labor, and overhead.

Traditional Management Accounting

An approach to accounting focused on measuring financial information for managerial decision-making.