Under Historical Accounting Methods for the Market Value of Capital

question 2

Multiple Choice

Under historical accounting methods for the market value of capital, FIs

• A)must write down the value of their assets to fully reflect market values.
• B)have a great deal of discretion in timing the write downs of problem loans.
• C)must conform to regulatory write-down schedules.
• D)have an incentive to fully reflect problems in the asset portfolio as they become known.
• E)invest in expensive computerized bookkeeping systems.

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Definitions:

Retained Earnings

The portion of a company's profits that are kept or retained and not paid out as dividends to shareholders, often used for reinvestment in the business.

Legal Capital Approach

Method of preparing Paid-In Capital by listing the legal section first.

Stock Dividend

It's a dividend payment made in the form of additional shares rather than a cash payout, representing a reinvestment of company earnings.

Stock Split

An action by a company to divide its existing stock into multiple shares to boost liquidity without changing shareholders' equity.