Why Do FI's Provide the Public with a Wide Range

question 14

Multiple Choice

Why do FI's provide the public with a wide range of financial services?

• A)Because intermediaries are required by law to do so.
• B)Because intermediaries are, by and large, profit seeking.
• C)Because intermediaries just like to make people happy.
• D)Because intermediaries are better at appraising the risk of default associated with lending to particular borrowers.

Determine the percentage of total overhead cost allocated to specific products.

Understand the principles of Activity-Based Costing (ABC).

Calculate activity rates for various cost pools in an ABC system.

Assign overhead costs to products using calculated activity rates.

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Definitions:

Safety Stock

Safety stock is additional inventory held by a business to prevent stockouts caused by variations in supply and demand.

Cash Flow

Cash Flow refers to the net amount of cash being transferred into and out of a business, indicating the company's liquidity over a certain period.

Precautionary Need

The motive to hold cash or assets to safeguard against unexpected emergencies or transactions.

Speculative Need

A financial concept where individuals or businesses hold cash or assets in speculation of market changes, expecting to profit from fluctuations in prices or exchange rates.