Asset/liability Management Is a Planning Tool Designed to Maximize Earnings

question 132

Multiple Choice

Asset/liability management is a planning tool designed to maximize earnings. ALM tries to create optimal risk/reward decisions and focuses on creating prices that achieve a desired spread. A sound ALM policy must manage many types of risks such as:

• A) Credit risk
• B) Liquidity risk
• C) Capital risk
• D) All of these

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Definitions:

Stockholders Of Record

Individuals or entities that are officially recorded as owning shares of a company at a specific point in time.

Treasury Stock

Initially issued shares that were subsequently repurchased by the company, leading to a decrease in the total number of shares on the market.

Par Common Stock

The nominal or face value assigned to common stock shares as recorded in the corporate charter, influencing the accounting of company stock transactions.

Cost Method

An accounting method where the investment is recorded at its acquisition cost, with no subsequent changes for increases or decreases in value.