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If a Large Number of Borrowers Default on Their Loans

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If a large number of borrowers default on their loans, the bank risks a solvency crisis.


Definitions:

Inventory

The total amount of goods and raw materials held by a business to facilitate production or meet customer demand.

Invest

The action of designating assets, typically capital, in hopes of generating financial gains.

Profit Rate

The ratio of profits generated to the amount of capital or resources invested, indicating the efficiency of an investment or business operation.

Inventory

The goods or materials a business holds for the ultimate purpose of resale or processing in the production process.

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