A Disadvantage of Using Purchased Liquidity Management to Manage a FI's

question 71

Multiple Choice

A disadvantage of using purchased liquidity management to manage a FI's liquidity risk is

• A)the resulting shrinkage of the FI's balance sheet.
• B)the relatively high cost of purchased liabilities.
• C)the accessibility of international money markets.
• D)tax considerations.
• E)loss of flexibility as a result of dependence upon purchased liabilities.

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Definitions:

Cash Basis

An accounting method where revenues and expenses are recognized when cash is actually received or paid out.

Bookkeeping

Bookkeeping is the systematic recording, organizing, and maintaining of financial transactions for a business or individual.

Profit and Loss

Profit and Loss, often referred to as P&L, is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period of time, usually a fiscal quarter or year.

Accounting Reports

Documents that give insights into the financial performance of a business, including trial balances, profit and loss statements, and balance sheets.