Refer to the Accompanying Balance Sheet for the First National

question 37

Multiple Choice

Refer to the accompanying balance sheet for the First National Bank. Assume the reserve ratio is 15 percent. If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be

• A) $50,000 and $120,000, respectively.
• B) $50,000 and $106,000, respectively.
• C) $36,000 and $120,000, respectively.
• D) $36,000 and $106,000, respectively.

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Definitions:

Short-Term Debt

Borrowings that are due for repayment within one year, used to finance immediate expenses or working capital requirements.

Common-Sized Income Statement

A financial statement in which all items are expressed as a percentage of sales, facilitating comparison with other periods or companies.

Total Assets

The sum of all assets owned by a company, including both current and non-current assets.

Vertical Analysis

A method of financial statement analysis in which each entry is listed as a percentage of another item, frequently used to review relative sizes of account entries.