A Banker Operating Under a System of Fractional Reserves

question 28

Multiple Choice

A banker operating under a system of fractional reserves

• A)is exposed to potential bank runs.
• B)must keep a prudent level of reserves.
• C)must lend money carefully.
• D)All of the above are correct.

Recognize the significance of debt-to-equity ratios for new and young businesses.

Differentiate between various types of financial obligations on a balance sheet.

Comprehend methods of financing for purchased equipment.

Grasp strategies to build credibility with financial institutions.

---

Definitions:

Direct Manufacturing Cost

Costs that are directly attributable to the production of goods, such as raw materials and direct labor expenses.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including the cost of materials and direct labor.

Gross Margin

The difference between revenue and the cost of goods sold, often expressed as a percentage of revenue, indicating the efficiency of a company in managing its production costs.

Relevant Range

The span of operations in which the beliefs regarding variable and fixed cost dynamics are accurate.