Financial Intermediaries Play the Basic Role of Transforming Financial Assets

question 51

Multiple Choice

Financial intermediaries play the basic role of transforming financial assets that are less desirable for a large part of the public into other financial assets (their own liabilities) which are more widely preferred by the public. This transformation involves at least one of four economic functions. Which of the below is NOT one of these functions?

• A) providing maturity intermediation
• B) enhancing risk via diversification
• C) reducing the costs of contracting and information processing
• D) providing a payments mechanism

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Definitions:

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is used globally for the preparation of public company financial statements.

Inventory Holding Gains

Gains resulting from an increase in the value of inventory that a company holds over a period.

Consignment

The process of placing goods with a third party who has the authority to sell the goods on behalf of the owner, but the ownership of the goods remains with the consignor until sold.

Inventory Valuation

A method used to assess the cost or market value of inventories a company holds at the end of a period.